Justia Energy, Oil & Gas Law Opinion Summaries

A blowout of oil, natural gas, and mud occurred in 2010 during deepwater drilling operations at the Macondo well, located on the Outer Continental Shelf (“OCS”) in the waters of the Gulf of Mexico. At the time of the blowout, the Deepwater Horizon, a drilling rig chartered by BP, plc. from Transocean Ltd., was attached to the Macondo well. Eleven men died from the resulting explosions and fires on the Deepwater Horizon. Defendants Robert Kaluza and Donald Vidrine were “well site leaders,” the highest ranking BP employees working on the rig. Defendants were indicted by a federal grand jury in the Eastern District of Louisiana on 23 counts, including 11 counts of seaman’s manslaughter. The district court granted Defendants’ motion to dismiss for failure to charge an offense because neither defendant fell within the meaning of the criminal statute. The government appealed this determination. Because the Fifth Circuit agreed that neither defendant fell within the meaning of the phrase “[e]very . . . other person employed on any . . . vessel,” the Court affirmed. View "United States v. Kaluza" on Justia Law

In 1999-2000, AmerGen purchased three nuclear power plants. The Nuclear Regulatory Commission transferred the operating licenses, making AmerGen obligated to decommission the plants, and extended the licensing to 2029, 2034, and 2026. Decommissioning may take 60 years. Prior owners had established qualified and nonqualified trust funds to pay for decommissioning. Contributions to a qualified fund (I.R.C. 468A), subject to limitations, are currently deductible. Investment incomes are taxed at a fixed rate. A nonqualified fund does not have those tax advantages. AmerGen's accountants advised that it was unlikely that the IRS would allow AmerGen to include the assumed decommissioning liability in the basis of the assets acquired on the date of the purchase and that the entire cash consideration would be allocated to the basis of transferred nonqualified funds, rather than to the basis of the plants. AmerGen sought IRS private letter rulings and required the sellers to make additional contributions to the trusts. They transferred $393 million in qualified funds and $581 million in nonqualified funds. On its 2001-2003 tax returns, AmerGen claimed that, in addition to the $93 million purchase price, it assumed decommissioning liabilities of $2.15 billion that should be included in the basis of the plants at the time of purchase. With that adjustment and corresponding depreciation and amortization deductions and reduced capital gains, AmerGen attempted to reduce its taxable income by $110 million per year. The IRS rejected the request. The Federal Circuit affirmed summary judgment that the economic performance requirement of 26 U.S.C. 461(h) applies to AmerGen as an accrual basis taxpayer so that it may not include the liabilities in basis. AmerGen did not economically perform decommissioning in the relevant tax years. View "Amergen Energy Co, LLC v. United States" on Justia Law

The Outer Continental Shelf (OCS) extends roughly 200 miles into the ocean to the limit of U.S. international-law jurisdiction. Billions of barrels of oil and trillions of cubic feet of natural gas lie beneath the OCS. Concerns about ecological vulnerability and potential harm to coastal tourism led to moratoriums on OCS drilling from 1982 until they were partially lifted in 2009. In 2010, the Deepwater Horizon oil rig disaster renewed debate about the safety of offshore drilling, but energy companies remain interested in offshore drilling. The Outer Continental Shelf Lands Act (OCSLA) created a framework for exploration and extraction of OCS oil and gas deposits. It requires the Secretary of the Interior to prepare a program every five years with a schedule of proposed leases for OCS resource exploration and development; the program must balance competing economic, social, and environmental values, 43 U.S.C. 1344. CSE challenged the latest leasing program as failing to comply with Section 18(a), which governs the balancing of competing economic, social, and environmental values; quantifying and assessing environmental and ecological impact; and ensuring equitable distribution of benefits and costs between OCS regions and stakeholders. CSE claimed that the Final Programmatic Environmental Impact Statement violated National Environmental Policy Act procedural requirements by using a biased analytic methodology and providing inadequate opportunities for public comment. The D.C. Circuit denied CSE’s petition. While CSE had associational standing to petition for review, its NEPA claims are unripe; two other challenges were forfeited and remaining challenges failed on their merits. View "Ctr. for Sustainable Econ. v. Jewell" on Justia Law

The U.S. Department of Energy (DOE) led the effort to clean up nuclear waste at the Hanford Nuclear Site in Washington state. URS Energy & Construction, Inc. (“URS Energy”), a wholly-owned subsidiary of URS Corporation, worked as a subcontractor on the project. An employee of URS Energy brought this action alleging violations of the Energy Reorganization Act (“ERA”) whistleblower protection provision concerning the cleanup efforts. The district court dismissed the DOE from the suit and granted summary judgment in favor of URS Corp. and URS Energy. The Ninth Circuit affirmed in part and reversed in part, holding (1) the DOE and URS Corp. were correctly dismissed for lack of administrative exhaustion, but administrative exhaustion was sufficient as to URS Energy; and (2) the employee introduced sufficient evidence to create a triable issue as to whether his whistleblowing activity was a contributing factor in the adverse employment action URS Energy took against him, and there were other existing genuine issues of fact that precluded summary judgment to URS Energy. Remanded. View "Tamosaitis v. URS Inc." on Justia Law

PRM Partners was a leaseholder of lands which covered an oil well. PRM Partners designated Petroleum Resource Managements, Corp. (PRM) as the operator of the well. PRM contracted with Hot Oil Services, Inc. to perform the day-to-day operations of the well. In 2009, Hot Oil requested that Basic Energy Services, LP perform workover operations on the well. While Basic Energy was performing the workover operations, a fire erupted, which damaged various pieces of equipment, including Basic Energy’s workover rig. Basic Energy sued PRM Partners and PRM to recover the damage to its equipment. The district court granted summary judgment for PRM Partners and PRM, concluding that Hot Oil was an independent contractor and that neither PRM nor PRM Partners could be held liable for the acts of an independent contractor. The Supreme Court (1) reversed and remanded on the issue of whether PRM breached the contract and reversed and remanded on the claim that PRM acted negligently in hiring Hot Oil, holding that the district court erred in entering summary judgment on these issues, as PRM failed to carry the initial burden of a summary judgment movant; and (2) ordered that PRM Partners be dismissed from the appeal. View "Basic Energy Servs., LP v. Petroleum Res. Mgmt., Corp." on Justia Law

In these consolidated petitions, Carriers challenged FERC's authority to approve a cost pooling agreement among the Carriers that allocates most fixed costs on the basis of each Carrier's share of combined interstate and intrastate utilization of the Trans Alaska Pipeline System (TAPS). The court found that the Interstate Commerce Act (ICA), 49 U.S.C. App. 13(6)(b), permits incidental regulation of intrastate commerce pursuant to approval of a pooling agreement under section 5(1); that any regulation of intrastate commerce challenged here was incident to the Pooling Agreement that FERC found just and reasonable for interstate commerce; and that the Commission did not act arbitrarily or capriciously in approving the Pooling Agreement or make findings unsupported by the evidence. Therefore, FERC did not have statutory authority to approve the settlement; did not improperly regulate intrastate commerce; and did comply with the Administrative Procedures Act (APA), 5 U.S.C. 500 et seq., requirements in reaching the order challenged in this case. Accordingly, the court denied the petitions. View "Tesoro Alaska Co. v. FERC" on Justia Law

The Third Circuit Court of Appeals certified a question of Pennsylvania law to the Pennsylvania Supreme Court. In August 2007, Appellee Wayne Harrison entered into a lease with Appellant Cabot Oil & Gas Corporation, per which Cabot obtained the exclusive right to explore oil-and-gas resources on Harrison's property. In exchange, the company agreed to pay an initial bonus plus a one-eighth royalty on oil or gas successfully produced from the land. Approximately halfway through the primary lease term, Harrison and his wife commenced a civil action against Cabot in a federal district court, seeking a declaration that the lease was invalid. The Harrisons alleged the company had fraudulently induced Mr. Harrison to enter into the lease via an agent's representation that Mr. Harrison would never receive any more than $100 per acre as a threshold bonus payment from a gas producing company. The Harrisons learned of other landowner-lessors receiving higher payments. The Pennsylvania Court accepted certification from the Third Circuit to address whether the primary term of an oil-and-gas lease should have been equitably extended by the courts, where the lessor pursued an unsuccessful lawsuit challenging the validity of the lease. In its counterclaim, Cabot sought a declaratory judgment that, in the event the Harrisons' suit failed, the primary term of the lease would be equitably tolled during the period of time during which the suit was pending, and, concomitantly, the lease would be extended for an equivalent period of time beyond what was provided by its actual terms. The district court awarded summary judgment in Cabot's favor on the suit to invalidate the lease. The court, however, resolved the counterclaim in the Harrisons' favor, concluding that Pennsylvania law does not provide for equitable extensions of oil and gas leases under the circumstances. Cabot appealed, arguing that it would be deprived of the full benefit of the bargained-for terms of its contract with the Harrisons by their "meritless lease challenges." Cabot contended Pennsylvania law provided that a party repudiates a contract, and thus effectuates an essential breach, when he makes an unequivocal statement that he will not perform in accordance with his agreement. The Pennsylvania Supreme Court disagreed with Cabot's contention, holding that the Harrisons' lease challenge was not an anticipatory breach of the lease. "Our reluctance, in this respect, is bolstered by the Harrisons' observation that oil-and-gas-producing companies are free to proceed according to their own devices to negotiate express tolling provisions for inclusion in their leases. [. . .] Certainly, in light of the voluminous decisional law, such companies are on sufficient notice of the prospect for validity challenges to warrant their consideration of such protective measures. [ . . .] Our determination is only that, consistent with the prevailing substantive law of this Commonwealth, the mere pursuit of declaratory relief challenging the validity of a lease does not amount to such." View "Harrison v. Cabot Oil & Gas Corp." on Justia Law

Ohio Rev. Code 1509 gives state government “sole and exclusive authority” to regulate the permitting, location, and spacing of oil and gas wells and production operations within Ohio. Beck Energy Corporation obtained a permit from the Ohio Department of Natural Resources in order to drill an oil and gas well on property within the corporate limits of the City of Munroe Falls. When Beck Energy began drilling, the City filed a complaint seeking injunctive relief and alleging that Beck Energy was violating several provisions of the Munroe Falls Codified Ordinances. The trial court issued a permanent injunction prohibiting Beck Energy from drilling until it complied with all local ordinances. The court of appeals reversed, concluding that section 1509.02 prohibited the City from enforcing the five ordinances. In so holding, the court rejected the City’s argument that the Home Rule Amendment to the Ohio Constitution allowed the City to impose its own permit requirements on oil and gas drilling operations. The Supreme Court affirmed, holding that the Home Rule Amendment does not grant the City the power to discriminate against, unfairly impede, or obstruct oil and gas activities and production operations that the State has permitted under chapter 1509. View "State ex rel. Morrison v. Beck Energy Corp." on Justia Law

In 2008, the General Assembly passed a senate bill that was codified as Mo. Rev. Stat. 393.1050, a statute exempting electric utilities that met a certain renewable energy target on a certain date from any solar energy requirements. A ballot initiative (“Proposition C”) was subsequently passed that imposed solar energy requirements on all electric utilities. Earth Island Institute, doing business as Renew Missouri, and additional parties filed a complaint with the Public Service Commission claiming that section 393.1050 was invalidated by the passage of Proposition C. The Commission determined that Proposition C did not impliedly repeal section 393.1050 because the two laws could be harmonized. The Supreme Court reversed, holding that section 393.1050 was impliedly repealed by the adoption of Proposition C because section 393.1050 in its entirety was in conflict with Proposition C. View "Earth Island Inst. v. Union Elec. Co." on Justia Law

Anadarko Petroleum Corporation, which acquired Kerr-McGee Oil & Gas Onshore L.P. in 2006, operated oil and gas wells from 2008 to 2011 and filed severance tax returns during this period. The severance tax rate an owner of oil and gas interests must pay depends on the fair market value of the owner’s interest. At issue in this case was how the value of such an interest is to be calculated. In 2010, the Auditing Division of the Utah State Tax Commission issued notices to Anadarko and Kerr-McGee (collectively Anadarko) informing Anadarko of a deficiency in its 2009 severance tax and assessing additional taxes and interest, and informing Kerr-McGee that its claimed 2009 refund was being reduced. Anadarko filed a petition for determination with the Commission. At issue before the Commission was whether the Auditing Division had applied the correct tax rate. The Commission granted summary judgment for the Auditing Division. The Supreme Court reversed, holding that the Commission improperly disallowed deductions Anadarko made for tax-exempt federal, state, and Indian tribe royalty interests under the severance tax statute. Remanded. View "Anadarko Petroleum Corp. v. Utah State Tax Comm’n" on Justia Law