Justia Energy, Oil & Gas Law Opinion Summaries

Until recently, incumbent public utilities were free to include in their tariffs and agreements “the option to construct any new transmission facilities in their particular service areas, even if the proposal for new construction came from a third party.” The Commission ordered utilities to remove rights of first refusal from their existing tariffs and agreements. In S.C. Pub. Serv. Auth. v. FERC, the court upheld the Commission's removal mandate. Under the Mobile-Sierra doctrine, FERC must presume a contract rate for wholesale energy is just and reasonable and cannot set aside the rate unless it is contrary to the public interest. The Commission had reserved judgment on whether to apply this presumption to the rights of first refusal until evaluating the individual utilities’ compliance filings. The court also reserved judgment. Petitioners seek review of FERC's determination at the compliance stage, urging that the Commission erred in concluding that Mobile-Sierra does not in fact protect their rights of first refusal contained in their Regional Transmission Organization (RTO) Membership Agreement. The court held that the Commission painted with a broader brush than necessary in applying potentially applicable Supreme Court precedent, but the court denied the petition nonetheless because nothing in the Mobile-Sierra doctrine requires its extension to the anticompetitive rights of first refusal at issue here. View "Oklahoma Gas and Electric Co. v. FERC" on Justia Law

SFPP and several shippers challenged aspects of three of FERC's orders related to filings by SFPP for cost-of-service tariffs on its pipelines. SFPP disputes FERC’s choice of data for calculating SFPP’s return on equity and the Commission’s decision to grant only a partial indexed rate for the 2009 index year. Shippers claim that FERC’s tax allowance policy for partnership pipelines, such as SFPP, is arbitrary or capricious and results in unjust and unreasonable rates. The court concluded that FERC's choice of data for assessing SFPP's real return on equity was arbitrary or capricious under the Administrative Procedure Act (APA), 5 U.S.C. 706(2)(A), because the Commission provided no reasoned basis to justify its decision to rely on the September 2008 data. Therefore, the court granted SFPP's petition on this issue. The court concluded that FERC's indexing analysis was not arbitrary or capricious where FERC complied with the plain text of its regulations when it found that granting SFPP a full indexed rate adjustment would result in unjust and unreasonable rates. Finally, the court also concluded that FERC must demonstrate that there is no double recovery of taxes for partnership pipelines. Accordingly, the court granted SFPP's petition in part and denied the petition in part. The court granted Shippers' petition and vacated FERC's orders with respect to the double recovery issue, and remanded to FERC. View "United Airlines, Inc. v. FERC" on Justia Law

Panoche, a producer of electricity, and Pacific Gas and Electric Company (PG&E), a utility that purchases its electricity, disputed which of them should bear the costs of complying with a legislatively-mandated program to reduce greenhouse gas emissions pursuant to the Global Warming Solutions Act (Assem. Bill 32 (2005–2006 Reg. Sess.). PG&E invoked the arbitration clause in its agreement with Panoche. Panoche resisted arbitration, arguing that the controversy was not ripe for resolution because ongoing regulatory proceedings at the California Air Resources Board and the California Public Utilities Commission would at least provide guidance in the arbitration and could render the proceeding unnecessary. The arbitration panel denied Panoche’s motion, and after a hearing determined that Panoche had assumed the cost of implementing AB 32 under the agreement and understood that at the time of signing. The arbitrators also concluded that the parties “provide[ed] for recovery of GHG costs” by Panoche through a “payment mechanism” in the agreement. The trial court agreed with Panoche, ruled that the arbitration was premature, and vacated the award. The court of appeal reversed and ordered confirmation of the award. Panoche identified no procedural disadvantage it suffered in going forward with the arbitration as scheduled and failed to meet the “sufficient cause” prong under Code of Civil Procedure 1286.2(a)(5). View "Panoche Energy Ctr. v. Pac. Gas & Elec." on Justia Law

Pursuant to 30 U.S.C. 185(a), in 1953, the U.S. Forest Service issued Enbridge’s predecessor a permit for use of an 8.10-mile strip within the Lower Michigan National Forest for a crude oil pipeline (Line 5). In 1992, USFS reissued the permit through December 2012, noting that USFS “shall renew the authorization” if the line "is being operated and maintained in accordance with" the authorization and other applicable laws. In 2011-2012, after a different Enbridge pipeline spilled oil into the Kalamazoo River, Enbridge obtained permit amendments to install “emergency flow release device[s]” on Line 5. In 2012, Enbridge requested permit renewal for Line 5. USFS conducted field studies on the potential impact on wildlife and vegetation; contacted the Pipeline and Hazardous Materials Safety Administration to confirm compliance with pipeline regulations; and accepted public comments. USFS proposed a categorical exclusion under the National Environmental Policy Act (NEPA), 42 U.S.C. 4332(2)(C), from the requirement of an Environmental Impact Statement or Environmental Assessment, categorizing the application as replacement of an existing or expired special use authorization, "the only changes are administrative, there are not changes to the authorized facilities or increases in the scope or intensity of authorized activities, and the holder is in full compliance." Sierra Club objected, noting that no EA or EIS had ever been completed for Line 5 because the original permit issued before enactment of NEPA and that intensity of activities along the pipeline had increased. USFS granted a categorical exclusion after considering biological assessment reports and finding “no extraordinary circumstances which may result in significant individual or cumulative effects on the quality of the environment.” The Sixth Circuit affirmed summary judgment, upholding re-issue of Enbridge’s permit. USFS followed appropriate decision-making processes and reached a non-arbitrary conclusion. View "Sierra Club v. United States Forest Serv." on Justia Law

Southwest Royalties, Inc., an oil and gas exploration company, filed a tax refund claim with the Comptroller, arguing that it was entitled to a tax exemption for some of its equipment related to oil and gas production operations such as casing, tubing, and pumps, together with associated services. The Comptroller denied relief. Southwest subsequently sued the Comptroller and the Attorney General, asserting that the equipment for which it sought refunds was used in separating oil, gas, and associated substances (collectively, hydrocarbons) into their different components. The trial court rendered judgment for the State, concluding that Southwest failed to meet its burden of proving that the exemption applied. The Supreme Court affirmed, holding that Southwest was not entitled to an exemption from paying sales taxes on purchases of the equipment because it did not prove that the equipment for which it sought a tax exemption was used in “actual manufacturing, processing, or fabricating” of hydrocarbons within the meaning of Tex. Tax Code Ann. 151.318(2), (5), or (10). View "Southwest Royalties, Inc. v. Hegar" on Justia Law

Trans-Western filed an amended complaint in federal district court asserting claims against U.S. Gypsum for breach of an oil and gas lease and breach of the covenant of quiet enjoyment. The district court found that U.S. Gypsum had wrongfully rescinded the lease and that the rescission constituted a breach of contract and a breach of the covenant of quiet enjoyment. The court awarded nominal damages of one dollar to Trans-Western. The parties appealed. The Tenth Circuit Court of Appeals certified to the Supreme Court the question of how to measure expectation damages for the breach of an oil and gas lease. The Supreme Court answered (1) expectation damages for the breach of an oil and gas lease are measured in much the same way as expectation damages for the breach of any other contract; (2) damages may include general and consequential damages; and (3) trial courts may allow the use of post-breach evidence to help establish and measure expectation damages. View "Trans-Western Petroleum, Inc. v. U.S. Gypsum Co." on Justia Law

Dominion obtained necessary certificates for transmission lines to connect Dominion’s recently-approved Wise County power plant with an existing Russell County substation. In 2008, Dominion offered Hylton $19,100 to purchase a 7.88-acre easement. Hylton owned 354 acres across 20 contiguous and two non-contiguous tracts. He owned the surface and mineral rights of some tracts and only the mineral rights of others. Dominion included an appraisal, acknowledging that, according to Hylton, two major coal seams run through or near the property and that Hylton’s ability to sell or lease those mineral rights might be damaged. The appraisal did not consider mineral rights in determining fair market value. The parties signed an agreement granting Dominion the right to enter and construct the transmission line. Dominion filed its petition for condemnation, limited to the surface use of Hylton’s property and moved to prohibit Hylton from presenting evidence of “the separate value of coal,” damage to tracts not taken, and “damages for duplicative or inconsistent claims.” Hylton later moved to dismiss, arguing that Dominion’s pre-petition offer to purchase was not a bona fide offer, under Code 25.1-204, so that Dominion had failed to meet jurisdictional requirements for condemnation. The trial court dismissed and awarded Hylton attorneys’ fees. The Supreme Court of Virginia reversed the dismissal and the denial of Dominion’s motion in limine with regard to evidence related to the separate value of the coal and the potential surface mine. Because the issue of whether the unity of lands doctrine applies with respect to neighboring lands, not part of the taking, is a question of fact, denying the motion on that issue was appropriate. View "Va. Elec. & Power Co. v. Hylton" on Justia Law

Plaintiffs filed suit against the state claiming, inter alia, that the prohibitions in the Minnesota Next Generation Energy Act, Minn. Stat. 216H.03, subd. 3(2) and (3), violate the Commerce Clause. The statute is intended to reduce statewide power sector carbon dioxide emissions by prohibiting utilities from meeting Minnesota demand with electricity generated by a new large energy facility in a transaction that will contribute to or increase statewide power sector carbon dioxide emissions. The district court granted plaintiffs summary judgment and a permanent injunction. The court concluded that plaintiffs meet the Article III standing requirement where Plaintiff Basin can demonstrate a probable economic injury resulting from governmental action; plaintiffs' claims are ripe for judicial review because the issues are predominately legal, and the challenged prohibitions are currently causing hardship by interfering with the ability of plaintiffs such as Basin to plan, invest in, and conduct their business operations; the district court did not err in declining to abstain under Railroad Commission of Texas v. Pullman Co.; the district court correctly concluded that the challenged prohibitions have the practical effect of controlling conduct beyond the boundaries of Minnesota; the statute has extraterritorial reach and will impose Minnesota’s policy of increasing the cost of electricity by restricting use of the currently most cost-efficient sources of generating capacity from prohibited sources anywhere in the grid, absent Minnesota regulatory approval or the dismantling of the federally encouraged and approved MISO transmission system; Minnesota may not do this without the approval of Congress; and the district court did not err by enjoining the defendant state officials from enforcing the prohibitions. The court dismissed plaintiffs' cross-appeal as moot. View "North Dakota v. Heydinger" on Justia Law

Parties to an agreement regarding an area of mutual interest for the purposes of oil and gas exploration sought to determine their respective rights under the agreement. The agreement gave the respondents in this case the right to participate in wells in futuro. The petitioners urged that the provision violated the rule against perpetuities. The district court agreed and granted judgment to the petitioners. The Court of Civil Appeals affirmed in part and reversed in part remanded the matter for further proceedings. The issues this case presented for the Supreme Court's review centered on whether a clause in an agreement giving a limited liability company the right to participate in all future wells on unleased property violated Article II, Section 32 of the Oklahoma Constitution prohibiting perpetuities, and whether a limited liability company was a "life in being." The Court answered the first question in the affirmative and the second question in the negative, finding that the district court did not err in granting a motion to dismiss based on these two questions. View "American Natural Resources, LLC v. Eagle Rock Energy Partners, L.P." on Justia Law

Department of Environmental Protection (DEP) regulations require that those deemed to be liable after a spill of hazardous materials within a specified radius of a public water supply undertake cleanup and monitoring to ensure the spill does not pose a danger to that water supply, 310 Code Mass. Regs. 40.0801, 40.0810, 40.0993(3)(a), 40.1030(2)(e). A 2007 modification exempts "oil" from some requirements when specific conditions are met, 310 Code Mass. Regs. 40.0924(2)(b)(3)(a). Peterborough owns a now-vacant Athol property, within a protection area, where it operated a gasoline station for more than 10 years. In 1994, a release of leaded gasoline from a subterranean gasoline storage tank was detected in soil on the site. DEP required Peterborough to undertake supervised cleanup and monitoring activities. In 2008, after the oil exemption was established, Peterborough submitted a revised plan, stating that further remediation was not required because the entirety of the spill fell within the exemption's definition of "oil." DEP responded that the meaning of "oil" in the exemption does not include gasoline additives such as lead, but refers only to petroleum hydrocarbons naturally occurring in oils, so that a spill of leaded gasoline could not be completely excluded from further remediation. The trial court, on summary judgment, and the Massachusetts Supreme Judicial Court, upheld the DEP interpretation of the regulation as reasonable. View "Peterborough Oil Co., LLC v. Dep't of Envtl. Prot." on Justia Law