Justia Energy, Oil & Gas Law Opinion Summaries

Appellant owned and operated the Sewell Creek Energy Facility, a "peaking" power plant that began operating in 2000. Appellees, neighbors of the power plant, filed suit in 2007 alleging that the power plant constituted a nuisance. At issue was whether appellants were entitled to summary judgment where the power plant was either a permanent nuisance or continuing nuisance that could be abated. The court found that the power plant's exhaust silencing system, which was an integral part of the gas turbines that generated power, was an enduring feature of the power plant's plan of construction and the noise emanating from the exhaust stacks resulted from the essential method of the plant's operation. Consequently, the exhaust stacks were a permanent nuisance. Thus, the court held that the Court of Appeals erred when it omitted any consideration of whether the nuisance resulted from an enduring feature of the power plant's plan of construction or an essential method of its operation and grappled only with whether the nuisance could be abated at "slight expense." The court held that appellees' action was barred under the statute of limitation for permanent nuisances because they did not file their lawsuit until almost seven years after the plant became operational, unless some new harm that was not previously observable occurred within the four years preceding the filing of their cause of action. The court also held that, to the extent the trial court found that a factual issue remained concerning whether there was an "adverse change in the nature" of the noises and vibrations coming from the plant after the start of the 2004 operating season, the denial of summary judgment was appropriate. By contrast, to the extent that the trial court found that a factual issue remained concerning whether there was an "adverse change in the... extent and amount" of the noises and vibrations after the 2004 operating season, the denial of summary judgment was inappropriate. Accordingly, the court affirmed in part and reversed in part.

Gas producers that lease land from Alaska must pay royalties calculated on the value of the gas produced from the leased area. The royalty may be calculated in one of two methods: the “higher of” pricing or contract pricing. “Higher of” pricing is the default method of calculating royalties and is calculated using market data and the prices of other producers. The Department of Natural Resources (DNR) usually does not calculate the royalty payments under “higher of” pricing until years after production. Under contract pricing, the lessee’s price at which it sells gas is used to determine the royalty payment. Appellant Marathon Oil requested contract pricing from 2008 onward and sought retroactive application of contract pricing for 2003-2008. The DNR approved contract pricing from 2008 onward but denied the retroactive application. The superior court affirmed the DNR’s decision. On appeal to the Supreme Court, Marathon argued that the statute that governs contract pricing permitted retroactive application of contract pricing. Upon review of the arguments and the applicable legal authority, the Supreme Court concluded that though the statute was ambiguous, it would defer to the DNR’s interpretation. Accordingly, the Court affirmed the superior court’s decision to uphold the DNR’s order.

Rather than undertaking appeals from the assessment of taxes on its gas assets in accordance with R.I. Gen. Laws 44-5-26(a), plaintiff electric company sought declaratory and injunctive relief directly from the superior court. Plaintiff sued the taxing authorities of most of Rhode Island's municipalities, requesting a declaration that because the municipalities failed to tax plaintiff's gas assets as tangible personal property, they assessed illegal taxes. The trial justice dismissed all but one count of plaintiff's complaint, holding that plaintiff did not file a timely appeal or invoke the court's equitable jurisdiction. The Supreme Court affirmed. Because plaintiff elected to bypass the applicable review procedures and proceed directly to the superior court, plaintiff failed to establish that it had been assessed an illegal tax. Thus, plaintiff could not avail itself of the direct appeal to the superior court.

Sunoco, the owner and operator of several petroleum-refining facilities, purchased electric service from Toledo Edison. The contract between the two companies permitted arrangements that differed from the standard rate schedules. BP Oil Company, which owns a competing refined located next to Sunoco's refinery, also had a contract with Toledo Edison. Both contracts contained 'most favored nation' clauses, which allowed Sunoco and BP to utilize any "arrangement, rates or charges" for their facilities that Toledo Edison had given to the other. At issue was whether Sunoco could invoke the clause to extend the duration of its contract with Toledo Edison to match the duration of BP's contract with Toledo Edison, which would result in a $13 million savings for Sunoco. The commission found the clause did not allow Sunoco to extend the duration of its contract. The Supreme Court reversed, holding that under the plain language of the clause, the word "arrangement" encompasses all non-price terms of a competitor's contract. Because duration is a non-price term of contract, it is subject to the clause.

The Public Utilities Commission allowed two electric power operating companies to adjust their economic-development cost-recovery riders and recover additional revenues. Industrial Energy Users-Ohio (IEU) sought a rehearing, which the commission denied. IEU appealed the order, arguing that the commission approved the rate increase without reviewing its reasonableness. The Supreme Court found the order prejudiced IEU because some of IEU's members paid higher rates as a result of the order. The Court then affirmed, holding that IEU failed to meet its burden to identify a legal problem with the order. Because the Court presumes that orders are reasonable, IEU must upset that presumption, and IEU did little more than disagree with the order, giving the Court no reason to reverse.

In 2004, Plaintiff-Appellant Vick Hubbard filed suit against Defendants Kaiser-Francis Oil Company, Texas Southwest Gas and GBK Corporation for breach of an oil and gas lease and a gas purchase contract. Pursuant to 12 OS Supp. Sec. 1101.1(B), Defendants offered Plaintiff $275 for each of the seven alleged breaches. Plaintiff did not accept the offers and did not submit a counteroffer. By the statute, the offers were deemed rejected. Defendants moved for summary judgment that was granted and entered by the trial court. Plaintiffs appealed. Thereafter, Defendants filed a joint motion to recover their costs and fees based on Plaintiff's failure to obtain a judgment for more that the combined amount of Defendants' offers. In 2005, the parties reached an agreement on litigation costs and attorney fees that were to be paid by Plaintiff. Plaintiff paid that amount and Defendants withdrew their motion. Because of Plaintiff's appeal, the case was remanded to district court. The parties moved for summary judgment. The court granted Defendants' motion. Judgment for Defendants was entered in 2007. Defendants subsequently filed a supplemental joint combined motion for attorney fees for costs they incurred since 2005. In 2008, the district court granted Defendants' motion. On appeal to the Supreme Court, the issues presented for review were matters of first impression. Of import in this case was: (1) whether Defendants were entitled to attorney fees under Sec. 1101.1 because they received a summary judgment, and (2) whether a judgment that was appealed and remanded negated Defendants' 1101.1 offer of judgment made prior to the appeal. Upon careful consideration of the arguments, the Supreme Court affirmed the lower courts' decisions in this case. The Court held that Defendants were entitled to litigation costs, and that the offer of judgment was applicable throughout the case, including through any appeals and remand.

After respondent was granted a permit by the Minnesota Public Utilities Commission (âMPUCâ) for routing and construction of a pipeline to deliver natural gas to an energy center within appellantâs city limits, appellant commenced an action for declaratory and injunctive relief seeking to require respondent to obtain a franchise from appellant to operate the pipeline. The district court dismissed, concluding that appellant did not have franchise authority over respondentâs pipeline, and the appeals court affirmed. The Supreme Court reversed and remanded, holding (1) a municipality is authorized by Minn. Stat. 301B.01 to impose a franchise on a public utility that has constructed and operates a gas pipeline located on public property within the municipality, regardless of whether the pipeline itself supplies gas to the public; (2) a municipality is authorized by Minn. Stat. 216B.36 to impose a franchise on a public utility that serves customers within the municipality or that uses public property within the municipality to serve customers elsewhere; and (3) the issuance of a permit by the MPUC for the construction of a gas pipeline does not preempt pursuant to Minn. Stat. 216G.02 a municipal ordinance requiring a franchise for the operation of the pipeline after construction is complete.

Five months after the Department of Public Utilities ("department") approved the request of Bay State Gas Company ("Bay State") to sell and transfer all the common stock of its subsidiary Northern Utilities, Inc. ("Northern"), Bay State filed a petition for a general increase in its natural gas distribution rates. The department denied that request while allowing Bay State a general rate increase of $19 million. Bay state appealed the department's decision asserting several points of error. The court affirmed the department's decision and held that the department expressly left open the "appropriate ratemaking treatment" to be afforded the operational cost impacts associated with the sale of Northern. Therefore, it was appropriate to address proper treatment of once-shared functions in light of Bay State's assertions during the section 96 Northern proceeding. The court rejected Bay State's other assertions and remanded to the county court where a judgment was to be entered affirming the decisions and order of the department.

Plaintiff-Appellant Sierra Club filed a petition with the Tenth Circuit in an attempt to stop Defendant-Appellee Two Elk Generation Partners, LP (Two Elk) from building a coal-fired power plant in Wyoming. Sierra Club argued that Two Elk was building the plant in violation of the Clean Air Act, 42 U.S.C. 7604. For over ten years, Two Elk had planned to build the power plant, and filed the appropriate applications with the local environmental authorities to receive permission to start construction. In late 2007, state authorities notified Two Elk that its environmental permit had expired. In the process of getting the permit renewed, Sierra Club tried to intervene to stop the process. While Two Elk and Sierra Club were fighting one another in the state administrative bodies and courts, Sierra Club filed a citizen suit with the federal district court. The federal district court dismissed Sierra Club's case, holding that the state courts already decided the same issues in its suit. On appeal to the Tenth Circuit, Sierra Club argued that it was not a party to the permit-application proceedings, and that it should not be precluded from bringing suit now. Furthermore, the Club argued that the Clean Air Act established the circumstances under which a citizen suit may be brought, and those circumstances were not met at the state court level. Upon careful consideration of the arguments and the applicable legal authority, the Tenth Circuit affirmed the lower court's decision. The Court found that Sierra Club's arguments under the Clean Air Act were indeed precluded by decisions from the state court proceedings. The Court dismissed Sierra Club's appeal.

Appellant, a Montana limited partnership which owned an electrical generating plant in Rosebud County, appealed the district court's order denying its motion to vacate the arbitration award ("Final Award") in its dispute with appellee, a Delaware corporation and a regulated public utility conducting business in Montana. At issue was whether the district court abused its discretion when if failed to vacate, modify, or correct the arbitration award. The court held that the district court did not abuse its discretion in denying appellant's motion where Montana's Uniform Arbitration Act, 27-5-311 MCA, did not permit a court to vacate an arbitration award in part; where Montana law was clear that a non-breaching party was still required to prove its damages; where the district court correctly noted in its order confirming the Final Award that the legal precedent on which appellant relied for its request to modify or correct the Final Award applied only to motions to vacate an award; and where the district court correctly determined that it lacked the authority to vacate the Final Award.