Justia Energy, Oil & Gas Law Opinion Summaries

Articles Posted in US Court of Appeals for the District of Columbia Circuit
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This case concerns how PJM, the manager of a large, multi-state electrical grid, prices the flow of electricity to utilities in times of congestion. Such congestion arises when energy is scarce in a particular location on the grid due to, for example, extreme weather conditions or a fire at a transmission station. That scarcity causes the dispatch of more expensive generation and can trigger the Transmission Constraint Penalty Factor (“Penalty Factor”) when such alternative generation is unavailable. The Penalty Factor imposes an upper bound on the costs PJM will incur to control a transmission constraint, and it is designed to send transparent price signals to the market and incentivize investment that will resolve the congestion and prevent it from recurring. Petitioner Citadel FNGE Ltd. is an energy trading firm. It challenged the Commission’s suspension of the Penalty Factor as arbitrary and capricious.   The DC Circuit denied the petitions. The court explained that substantial evidence supported the Commission’s decision that the Penalty Factor, as applied to the unique Northern Neck circumstances, could not work as designed because it increased costs without incentivizing supply or demand responses. Because application of the Penalty Factor increased costs for consumers without a commensurate benefit, the Commission reasonably found that its application in this context was unjust and unreasonable. View "Citadel FNGE Ltd. v. FERC" on Justia Law

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This petition challenges several interrelated orders of the Federal Energy Regulatory Commission (“FERC” or “Commission”) that permitted the creation of a new energy transmission service across several states in the Southeast region of the United States, entitled the Southeast Energy Exchange Market (“SEEM”). FERC adopted the first order (“Deadlock Order”) by operation of law when its four Commissioners deadlocked 2-2 on whether the overall proposal was “just and reasonable” and otherwise met the requirements of the Federal Power Act (“FPA” or “Act”), and related FERC regulations. In a later order by majority vote, the Commission accepted tariff revisions by transmission service providers within SEEM to enable the new transmission service. Petitioners challenged these orders throughout the initial proceedings, on rehearing at the Commission, and now in this petition.   The DC Circuit granted the petition in part, denied the petition in part, and remanded it to the Commission for further proceedings. The court explained that since SEEM “began operations in November 2022” and only provides energy transactions for non-firm service, it follows that vacatur would not be disruptive, and the parties offer no arguments to the contrary in their briefing. Accordingly, vacatur of the Tariff Order is appropriate. The court wrote that the Commission’s orders finding Petitioners’ rehearing requests of the Deadlock Order untimely are vacated, and the petition—as it relates to review of the Deadlock Order and the associated orders accepting amendments to the SEEM Proposal—is remanded without vacatur of the related orders. View "Advanced Energy United, Inc. v. FERC" on Justia Law

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XO Energy petitioned for a review of the Federal Energy Regulatory Commission’s approval of filings implementing a regional transmission organization’s (“RTO”) revised Forfeiture Rule for Financial Transmission Rights (“FTRs”). It contends that the Commission erred as a matter of law in declining to issue refunds to market participants who incurred forfeitures under the unapproved interim Rule. It further contends that the Commission’s approval of the revised 2021 Rule was arbitrary and capricious.   The DC Circuit granted the petition in part and denied it in part. The court affirmed the Commission’s denial of refunds and remands without vacating the 2021 Rule for further explanation of the Commission’s decision to exclude consideration of leverage as a required element of the Rule. The court explained that although the Commission acknowledges that leverage might be one way to determine cross-product manipulation, it states that it opted to allow PJM to employ other means to detect this conduct rather than require exemptions based on leverage. That is the extent of the Commission’s explanation. It does not address XO Energy’s position that market manipulation cannot occur when the net losses of a trader’s virtual transaction portfolio exceed the net profits from its FTR portfolio. Nor does it explain why the exclusion of this requirement strikes the appropriate balance between preventing manipulative conduct and not hindering legitimate hedging activity. Absent such explanation of its decision, the Commission’s failure to order a leverage exemption appears arbitrary and capricious. View "XO Energy MA, LP v. FERC" on Justia Law

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Mountain Valley Pipeline, LLC has been trying to build its eponymous Mountain Valley Pipeline through West Virginia and Virginia. In 2017, the Federal Energy Regulatory Commission first issued a certificate approving the project. To build an interstate natural gas pipeline, a company often needs additional federal permits from agencies other than the Commission. Mountain Valley needed approvals from the Bureau of Land Management, Forest Service, Army Corps of Engineers, and Fish and Wildlife Service. While Mountain Valley initially obtained each of those additional permits, the United States Court of Appeals for the Fourth Circuit vacated all of them over time. The Commission responded with a series of follow-up orders. As Mountain Valley reacquired permits from the other agencies, the Commission extended the deadline for completing construction and authorized work to resume. Several environmental groups petitioned for a review of the Commission’s orders allowing the project to proceed.   The DC Circuit denied most of their claims and concluded that one is moot. But the court agreed with one of the claims: that the Commission inadequately explained its decision not to prepare a supplemental environmental impact statement addressing unexpectedly severe erosion and sedimentation along the pipeline’s right-of-way. While the court granted the petitions for review in part on that ground, it did not vacate the Commission’s orders allowing work on the project to resume. Instead, the court remanded the orders without vacatur to enable the Commission either to prepare a supplemental environmental impact statement or to better explain why one is unnecessary. View "Sierra Club v. FERC" on Justia Law

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The Pipeline and Hazardous Materials Safety Administration (PHMSA) prescribe safety standards for pipelines on behalf of the Secretary of Transportation. Two oil and gas associations, GPA Midstream and the American Petroleum Institute, petitioned for review of a safety standard requiring their members to install remote-controlled or automatic shut-off valves in some types of new or replaced gas and hazardous liquid pipelines. Petitioners challenged the standard as it applies to “gathering” pipelines used to collect raw gas or crude oil from a well. They argued the PHMSA unlawfully failed to disclose the economic basis for regulating gathering pipelines when it proposed the standard and also failed to make a reasoned determination that regulating these pipelines was appropriate.   The DC Circuit granted the petition. The court explained that the PHMSA said nothing about the practicability or the costs and benefits of the standard for gathering pipelines until promulgating the final rule, even though the law required it to address those subjects when publishing the proposed rule for public comment and peer review. The PHMSA also ultimately failed to make a reasoned determination that the benefits of regulating gathering pipelines would exceed the costs and that doing so would be practicable, as required by law. View "GPA Midstream Association v. DOT" on Justia Law

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The Alaska Gasline Development Corporation sought authorization to build and operate a system of natural gas facilities. After the Federal Energy Regulatory Commission granted that authorization, the Center for Biological Diversity and the Sierra Club (collectively, “CBD”) petitioned the DC Circuit for review.The DC Circuit dismissed the petition in part and denied it in part. The court explained that in approving the Alaska Liquid Natural Gas Project, the Commission complied with the NGA, NEPA, and the APA. CBD failed to provide any reason for the court to disturb the Commission’s reasonable determinations. Further, the court explained that the Commission properly assessed the cumulative impacts on beluga whales. CBD may disagree with the Commission’s policy choice to approve the Project, but the Commission comported with its regulatory obligations. To the extent the issues raised in the petition for review were not exhausted, the court dismissed the petition for lack of jurisdiction View "Center for Biological Diversity v. FERC" on Justia Law

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The United States seized oil cargo it claims belongs to the Islamic Republic of Iran. Appellants attached the oil in order to satisfy money judgments they hold against Iran. The district court upheld the United States' claim of sovereign immunity and quashed the attachments.
The DC Circuit affirmed the district court’s judgment. The court held (1) federal sovereign immunity prevents the attachment and garnishment of oil proceeds in a bank account of the United States and (2) the Terrorism Risk Insurance Act of 2002 (TRIA) does not waive that immunity. The court explained that the TRIA does not expressly mention the United States, its sovereign immunity, or its susceptibility to suit under the statute. Because the TRIA has nothing express to say about federal sovereign immunity, the notwithstanding clause cannot aid Appellants. Because sovereign immunity prevents Appellants from taking further steps to seize the proceeds from the United States’ sale of the contested oil, the court wrote it has no occasion to reach the alternative grounds for affirmance raised by the Government. View "Steven Greenbaum v. Islamic Republic of Iran" on Justia Law

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The Edison Electric Institute and NorthWestern Corporation, d/b/a NorthWestern Energy (collectively, “Utilities”) petition for review of an order by the Federal Energy Regulatory Commission (“Commission”) in which the Commission granted Broadview Solar’s application to become a qualifying facility under the Public Utility Regulatory Policies Act of 1978 (“PURPA”). The Solar Energy Industries Association (“SEIA”) petitions for review of the Commission’s denial of its motion to intervene in the adjudication of Broadview’s application.   The DC Circuit concluded that the Commission’s interpretation of the statute is entitled to deference and that the Commission did not act arbitrarily or capriciously and accordingly denied the Utilities’ petitions. The court explained that the Utilities challenge the Commission’s decision to look at Broadview’s instantaneous net power output and not its power output over time. The statute measures “power production capacity” in “megawatts.” But power production over time is measured in “megawatt-hours.” Rather than being arbitrary and capricious, the Commission’s focus on instantaneous power production adhered to the statutory language.   Further, the court dismissed SEIA’s petitions because it lacks Article III standing. The court explained that SEIA’s failure to timely intervene is the result of its own mistaken judgment. The effect of that mistake—SEIA’s inability to participate in the Commission’s proceedings—does not give rise to an Article III injury. View "Solar Energy Industries Association v. FERC" on Justia Law

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The petitions for review sought reversal of a refund order by the Federal Energy Regulatory Commission (FERC or Commission) upon finding a discrepancy in petitioner Ameren Illinois’s self-reported operational costs. Instead of reporting construction-related materials and supplies costs on line 5 of page 227 of Form 1, Ameren Illinois reported these costs on line 8 with the result that it over-collected for transmission costs. The Commission found that this reporting error was contrary to Ameren Illinois’s filed rate, which, prior to June 1, 2020, did not allow it to recover costs recorded to line 5 of page 227.   The DC Circuit affirmed the Order, denying review and reconsideration. The court explained that the Commission’s decision that Ameren lacked the discretion to report construction-related costs on line 8 was not unreasonable, arbitrary and capricious, or otherwise contrary to law. The court reasoned that although the Commission “may not retroactively alter a filed rate to compensate for prior over- or underpayments,” Exxon Mobil Corp. v. FERC, 571 F.3d 1208, 1211 (D.C. Cir. 2009), that is not what occurred here. All the Commission has done is require Ameren Illinois to correct a reporting error that resulted in overcharging customers for expenses not allowed under Ameren Illinois’s then-registered formula rate. Its contrary arguments fail to demonstrate that the refund order was unjust or contrary to the law. View "Ameren Illinois Company v. FERC" on Justia Law

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The Federal Energy Regulatory Commission’s (FERC) licensing of the Conowingo Dam on the Susquehanna River in Maryland. Under section 401(a)(1) of the Clean Water Act, FERC may issue a license only if the state where the dam is located either certifies that the dam will comply with the Act’s water quality standards or waives its authority to do so. After initially granting a section 401(a)(1) certification, Maryland attempted to withdraw it and waive its authority as part of a settlement with the dam’s operator, which FERC then used as the basis for the Conowingo license.   The DC Circuit vacated the license explaining that by issuing a license under such circumstances, FERC exceeded its authority under section 401(a)(1). The court remanded o FERC for further proceedings. The court explained that Section 401(a)(1) limits FERC’s power to issue a license to two circumstances: (1) where a state has granted a certification; or (2) where the state has waived its authority to certify “as provided in the preceding sentence” by failing or refusing to act. This leaves no room for FERC’s third alternative, in which it issued a license based on a private settlement arrangement entered into by Maryland after the state had issued a certification with conditions but then changed its mind. Accordingly, the court held that vacatur is appropriate. View "Waterkeepers Chesapeake v. FERC" on Justia Law