Justia Energy, Oil & Gas Law Opinion SummariesArticles Posted in US Court of Appeals for the Seventh Circuit
West v. Charter Communications, Inc.
In 1938, West’s predecessor granted Louisville Gas & Electric’s predecessor a perpetual easement permitting a 248-foot-tall tower carrying high-voltage electric lines. In 1990, Louisville sought permission to allow Charter Communication install on the towers a fiber-optic cable that carries communications (telephone service, cable TV service, and internet data); West refused. In 2000 Louisville concluded that the existing easement allows the installation of wires that carry photons (fiber-optic cables) along with the wires that carry electrons. West disagreed and filed suit, seeking compensation. The Seventh Circuit affirmed that the use that Louisville and Charter have jointly made of the easement is permissible under Indiana law. The court cited 47 U.S.C. 541(a)(2), part of the Cable Communications Policy Act of 1984, which provides: Any franchise shall be construed to authorize the construction of a cable system over public rights-of-way, and through easements, which is within the area to be served by the cable system and which have been dedicated for compatible uses, except that in using such easements the cable operator shall ensure…. The court examined the language of the easement and stated: “At least the air rights have been “dedicated” to transmission, and a telecom cable is “compatible” with electric transmission. Both photons and electrons are in the electromagnetic spectrum.” View "West v. Charter Communications, Inc." on Justia Law
Exelon Corp. v. Commissioner of Internal Revenue
In 1999, after deregulation of the energy industry in Illinois, Exelon sold its fossil-fuel power plants to use the proceeds on its nuclear plants and infrastructure. The sales yielded $4.8 billion, $2 billion more than expected. Exelon attempted to defer tax liability on the gains by executing “like-kind exchanges,” 26 U.S.C. 1031(a)(1). Exelon identified its Collins Plant, to be sold for $930 million, with $823 of taxable gain, and its Powerton Plant, to be sold for $870 million ($683 million in taxable gain) for exchanges. Exelon identified as investment candidates a Texas coal-fired plant to replace Collins and Georgia coal-fired plants to replace Powerton. In “sale-and-leaseback” transactions, Exelon leased an out-of-state power plant from a tax-exempt entity for a period longer than the plant’s estimated useful life, then immediately leased the plant back to that entity for a shorter sublease term. and provided to the tax-exempt entity a multi-million-dollar accommodation fee with a fully-funded purchase option to terminate Exelon’s residual interest after the sublease. Exelon asserted that it had acquired a genuine ownership interest in the plants, qualifying them as like-kind exchanges. The Commissioner disallowed the benefits claimed by Exelon, characterizing the transactions as a variant of the traditional sale-in-lease-out (SILO) tax shelters, widely invalidated as abusive tax shelters. The tax court and Seventh Circuit affirmed, applying the substance over form doctrine to conclude that the Exelon transactions failed to transfer to Exelon a genuine ownership interest in the out-of-state plants. In substance Exelon’s transactions resemble loans to the tax-exempt entities. View "Exelon Corp. v. Commissioner of Internal Revenue" on Justia Law
Village of Old Mill Creek v. Star
Regional transmission organizations manage the interstate grid for electricity, conduct auctions through which many large generators of electricity sell most or all of their power, and are regulated by the Federal Energy Regulatory Commission (FERC) Illinois subsidizes nuclear generation facilities by granting “zero emission credits,” which generators that use coal or gas to produce power must purchase from the recipients at a price set by the state. Electricity producers and municipalities sued, contending that the price‐adjustment aspect of the system is preempted by the Federal Power Act because it impinges on the FERC’s regulatory authority. They acknowledge that a state may levy a tax on carbon emissions; tax the assets and incomes of power producers; tax revenues to subsidize generators; or create a cap‐and‐trade system requiring every firm that emits carbon to buy credits from firms that emit less carbon. They argued that the zero‐emission‐credit system indirectly regulates the auction by using average auction prices as a component in a formula that affects the credits' cost. The Seventh Circuit affirmed summary judgment for the defendants. Illinois has not engaged in discrimination beyond that required to regulate within its borders. All Illinois carbon‐emitting plants need to buy credits. The subsidy’s recipients are in Illinois. The price effect of the statute is felt wherever the power is used. All power (from inside and outside Illinois) goes for the same price in an interstate auction. The cross‐subsidy among producers may injure investors in carbon‐ releasing plants, but only plants in Illinois. View "Village of Old Mill Creek v. Star" on Justia Law