Justia Energy, Oil & Gas Law Opinion Summaries

Darrell Jent suffered serious injuries while working on an oil rig. The rig’s owner, Precision Drilling Company, L.P., paid him a settlement, then made a claim on its insurance. The insurance company, Lexington Insurance Company, denied the claim. Precision sued, contending that Lexington should have reimbursed the money it paid Jent. Lexington issued two insurance policies covering Precision for accidents exactly like Jent's. However, Lexington argued that under Wyoming state law, the policies were a nullity, so any coverage here was more illusory than real and that Precision was solely responsible. "There can be no doubt that Wyoming law usually prohibits those engaged in the oil and gas industry from contractually shifting to others liability for their own negligence." The district court agreed with Lexington and granted its motion for summary judgment. After review, the Tenth Circuit reversed, finding that the district court misinterpreted the statute that was grounds for Lexington's motion. The case was then remanded for further proceedings. View "Lexington Insurance v. Precision Drilling" on Justia Law

In 2001, EQT sold or leased to Journey several oil- and natural-gas-producing properties in Kentucky. Both parties continued to conduct oil and natural-gas operations in the state, but Journey later concluded that EQT was operating on some of the lands that had been conveyed to Journey. Journey sought a declaration that it owned or controlled those properties and that EQT was liable for the oil and natural gas that EQT had removed from those properties. The district court concluded on summary judgment that the parties’ 2001 contract had unambiguously conveyed the disputed properties to Journey. A jury found that EQT’s trespasses on Journey’s lands were not in good faith. The court subsequently required EQT to pay $14,288,432 in damages and transfer certain oil and natural-gas wells to Journey. The Sixth Circuit affirmed, rejecting arguments that the district court erred in construing the parties’ contract, in excluding portions of EQT’s proffered evidence, and in crafting the remedy for EQT’s trespasses. EQT carried out its drilling despite obvious indicators that its ownership of the underlying property was doubtful, establishing an ample basis to conclude that EQT’s trespasses were not in good faith. View "Journey Acquisition-II, L.P. v. EQT Prod.Co." on Justia Law

In 2014, Dominion obtained authorization from the Commission to convert the Cove Point liquefied natural gas (“LNG”) facility from an import maritime terminal to a mixed-use, import and export terminal. BP Energy receives pipeline and terminal services as an import customer of Cove Point under a contract with Dominion, the facility's owner. BP Energy petitions for review of the Commission’s determination that Dominion did not act in an unduly discriminatory manner under section 3(e)(4) of the Natural Gas Act (NGA), 15 U.S.C. 717b(e)(4), when it agreed to shorten the contract term of a non-open access customer’s terminal services contract, Statoil Natural Gas, without offering a corresponding “turn back” option to open access customers such as BP Energy. The court remanded to the Commission for further explanation of why the 2012 turn back agreement between Dominion and Statoil was not unduly discriminatory as to BP Energy under NGA section 3(e)(4). Although the court need not reach BP Energy’s contention that the agreement was an impermissible “sweetheart deal,” the Commission may also wish to consider and explain on remand the extent to which such a deal is relevant to the undue discrimination analysis. View "BP Energy Co. v. FERC" on Justia Law

Petitioners seek review of the Commissions' conditional authorization of the conversion of the Cove Point liquefied natural gas (“LNG”) facility from an import maritime terminal to a mixed-use, import and export terminal. For the reasons set forth in Sierra Club v. FERC (Freeport), the court concluded that the Commission was not required under the National Environmental Policy Act (NEPA), 42 U.S.C. 4321 et seq., to consider indirect effects of increased natural gas exports through the Cove Point facility, including climate impacts. In regard to petitioners’ remaining challenges to the Commission’s NEPA analysis of the impacts of ballast water on water quality, maritime traffic on the North Atlantic right whale, and the Cove Point facility’s operations on public safety, the court concluded that petitioners fail to show that the Commission did not adequately address these concerns. Accordingly, the court denied the petition for review. View "EarthReports, Inc. v. FERC" on Justia Law

Plaintiffs filed suit alleging that the government violated various federal statutes by allowing Cape Wind's offshore energy project to move through the regulatory approval process. The Bureau allegedly violated the National Environmental Policy Act (NEPA), 42 U.S.C. 4332(2)(C), the Shelf Lands Act, 43 U.S.C. 1337(p), the National Historic Preservation Act, 54 U.S.C. 306108, and the Migratory Bird Treaty Act, 16 U.S.C. 703(a). The Bureau and the United States Coast Guard allegedly violated the Coast Guard and Maritime Transportation Act, Pub. L. No. 109-241, 414, 120, Stat. 516, 540 (2006). The Fish and Wildlife Service allegedly violated the Endangered Species Act, 16 U.S.C. 1538. The district court rejected most of plaintiffs' claims and granted partial summary judgment to the government agencies. The district court then rejected plaintiffs’ remaining claims, granted summary judgment, and dismissed the case. The court reversed the district court’s judgment that the Bureau’s environmental impact statement complied with NEPA and that the Service’s incidental take statement complied with the Endangered Species Act, and the court vacated both statements. The court affirmed the district court's judgment dismissing plaintiffs' remaining claims, and remanded for further proceedings. View "Public Employees v. Hopper" on Justia Law

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