Justia Energy, Oil & Gas Law Opinion Summaries

An independent natural gas producer contracted with a pipeline operator to secure firm transportation capacity through an expansion project, which involved adding new compressor stations to an existing pipeline segment. The producer agreed to pay for the construction of these facilities and the applicable fuel and power charges. The pipeline operator recoups fuel costs through rates based on the amount of gas shipped, with costs increasing exponentially as more gas is transported. After the expansion, the pipeline operator implemented a two-tier fuel rate system: the producer was always charged the highest marginal fuel rate, as if its gas was the last and most expensive to move through the pipeline, while all other shippers paid an average rate.Initially, the Federal Energy Regulatory Commission (FERC) approved the pipeline operator’s tariff, including the two-tier rate structure, and later reaffirmed this approach when the producer protested after experiencing significantly higher fuel rates compared to other shippers. The producer argued that the rate structure was unduly discriminatory and not “just and reasonable” under the Natural Gas Act. An administrative law judge upheld the rates, and FERC affirmed, reasoning that the producer, as the “but for” cause of the expansion, should bear the highest marginal costs to prevent subsidization by other shippers.The United States Court of Appeals for the District of Columbia Circuit reviewed the case and held that FERC’s approval of the two-tier fuel rate was arbitrary and capricious. The court found that perpetually assigning the producer the highest marginal fuel rate was disconnected from the actual costs imposed by its use of the pipeline and violated the principle of cost causation. The court granted the producer’s petition for review, vacated FERC’s order, and remanded for further proceedings to establish a just and reasonable rate consistent with cost-causation principles. View "Antero Resources Corporation v. Federal Energy Regulatory Commission" on Justia Law

NFEnergía LLC operates a liquefied natural gas (LNG) import facility in San Juan, Puerto Rico, which was constructed and operated without prior authorization from the Federal Energy Regulatory Commission (FERC). After a series of hurricanes severely damaged Puerto Rico’s electrical grid, NFEnergía sought to expand its operations by building a new pipeline to supply emergency generators operated by the Army Corps of Engineers. FERC asserted jurisdiction over the facility and instructed NFEnergía to apply for the necessary authorization but declined to require the facility to cease operations. When NFEnergía applied for authorization to build the new pipeline, FERC stated it would not take action to prevent construction and operation pending its review, citing the urgent need to stabilize Puerto Rico’s grid and the involvement of multiple federal agencies.Previously, FERC had issued orders asserting jurisdiction over the import facility and requiring NFEnergía to seek authorization, but allowed continued operation due to the emergency circumstances. After NFEnergía applied for authorization for the new pipeline, FERC issued further orders clarifying that it would not prevent immediate construction and operation, and that both the facility and pipeline applications would be reviewed together. FERC denied rehearing and continued processing the applications in a consolidated proceeding. Environmental organizations petitioned for review of these orders, arguing that FERC’s actions amounted to de facto authorization without proper statutory or environmental review.The United States Court of Appeals for the District of Columbia Circuit reviewed the case. The court held that FERC’s orders reflected an unreviewable exercise of enforcement discretion, rather than a substantive authorization of the pipeline’s construction and operation. The court found that the Natural Gas Act does not provide guidelines that would rebut the presumption against judicial review of agency non-enforcement decisions. Accordingly, the court denied the petition for review. View "El Puente de Williamsburg, Inc. v. FERC" on Justia Law

The case concerns a challenge to a 2024 rule issued by the Department of Energy (DOE) that revised the method for calculating the “petroleum equivalency factor” (PEF), which is used to determine the fuel economy values of electric vehicles for regulatory purposes. The DOE had previously used a “fuel content factor” of 1/0.15, which significantly inflated the fuel economy ratings of electric vehicles. In its 2023 proposal, DOE suggested eliminating this factor, but in the final rule, it opted to phase it out gradually over several model years. The final rule also introduced a new method for calculating the PEF, using a “cumulative gasoline-equivalent fuel economy of electricity” based on the projected useful life of an electric vehicle fleet—a method not included in the proposed rule.Several states and the American Free Enterprise Chamber of Commerce petitioned for review in the United States Court of Appeals for the Eighth Circuit. They argued that the DOE exceeded its statutory authority by retaining the fuel content factor and violated notice-and-comment requirements by adopting a new calculation method not previously proposed. The petitioners asserted standing based on increased costs to maintain public roads due to heavier electric vehicles and environmental harms from increased greenhouse gas emissions.The Eighth Circuit found that the petitioners had standing and that the case was not moot, even in light of new EPA emissions standards. The court held that DOE exceeded its statutory authority by retaining the fuel content factor, as the relevant statute did not authorize such an approach. Additionally, the court determined that DOE violated notice-and-comment procedures by failing to provide adequate notice of the new cumulative calculation method. The court concluded that these deficiencies were not severable from the rest of the rule.Accordingly, the Eighth Circuit granted the petition for review, vacated the 2024 final rule, and remanded the matter to DOE. View "State of Iowa v. Wright" on Justia Law

Fieldwood Energy LLC, an oil and gas company, contracted with Island Operating Company, Inc. (IOC) through a Master Services Contract (MSC) to provide workers for oil and gas production services on offshore platforms in the Gulf of Mexico. The MSC defined the work as “Lease Operators,” and a subsequent work order requested “A Operators” to perform tasks such as compliance testing and equipment checks on the platforms. The contract required Fieldwood to provide marine transportation for workers and equipment, which it did by hiring Offshore Oil Services, Inc. (OOSI) to transport IOC employees, including Tyrone Felix, to the platforms. Felix was injured while disembarking from OOSI’s vessel, the M/V Anna M, and subsequently made a claim against OOSI.OOSI filed a complaint for exoneration or limitation of liability in the United States District Court for the Eastern District of Louisiana. OOSI also sought indemnification from IOC under the MSC’s indemnity provision. IOC moved for summary judgment, arguing that Louisiana law, specifically the Louisiana Oilfield Anti-Indemnity Act (LOAIA), rendered the indemnity provision unenforceable. The district court agreed, finding that the MSC was not a maritime contract because vessels were not expected to play a substantial role in the contract’s performance, and thus Louisiana law applied. The court granted summary judgment for IOC on indemnity and insurance coverage, and later on defense costs after OOSI settled with Felix.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed the district court’s summary judgment de novo. The Fifth Circuit held that the MSC was not a maritime contract because neither its terms nor the parties’ expectations contemplated that vessels would play a substantial role in the contract’s completion. As a result, Louisiana law applied, and the LOAIA barred enforcement of the indemnity provision. The Fifth Circuit affirmed the district court’s summary judgment in favor of IOC. View "Offshore Oil Services, Inc. v. Island Operating Co." on Justia Law

This case involves a challenge to a tariff adopted by the California Public Utilities Commission (Commission) that significantly reduced the compensation utilities pay to customers who generate electricity through rooftop solar panels and export excess energy to the grid. Petitioners, including environmental organizations, argued that the Commission’s tariff was inconsistent with Public Utilities Code section 2827.1, which requires the Commission to ensure that compensation for customer-generators reflects the costs and benefits of renewable generation and supports sustainable growth, particularly among disadvantaged communities.The First Appellate District, Division Three, of the California Court of Appeal granted a writ of review and affirmed the Commission’s decision. In doing so, the Court of Appeal applied a highly deferential standard of review derived from the California Supreme Court’s decision in Greyhound Lines, Inc. v. Public Utilities Com., asking only whether the Commission’s interpretation of the statute bore a reasonable relation to statutory purposes and language. The court concluded that the Commission’s approach satisfied this standard and declined to engage in a more searching review of the statutory interpretation.The Supreme Court of California reviewed the case to determine whether the deferential Greyhound standard remains appropriate following legislative amendments to the Public Utilities Code. The Supreme Court held that, for Commission decisions not pertaining solely to water corporations, the deferential Greyhound standard no longer applies. Instead, courts must independently review the Commission’s statutory interpretations under the standards set forth in Public Utilities Code sections 1757 and 1757.1, which parallel the review of other administrative agencies. The Supreme Court reversed the judgment of the Court of Appeal and remanded the case for further proceedings consistent with this less deferential standard. View "Center for Biological Diversity, Inc. v. Public Utilities Com." on Justia Law

The case concerns a challenge to the United States Department of the Interior’s approval of the 2024–2029 National Outer Continental Shelf Oil and Gas Leasing Program, which authorizes up to three lease sales in the Gulf of Mexico region. Environmental organizations argued that the Department failed to adequately assess the risks to vulnerable coastal communities, did not properly consider the endangered Rice’s whale in its environmental sensitivity analysis, overlooked potential conflicts with other ocean uses, and did not sufficiently balance the program’s projected benefits against its environmental costs. The Department, in coordination with the Bureau of Ocean Energy Management, had developed the program through a multi-year process involving public comment and environmental review.After the Department finalized the program, the environmental groups and the American Petroleum Institute (API) each petitioned for review in the United States Court of Appeals for the District of Columbia Circuit. API later withdrew its petition but remained as an intervenor. The environmental petitioners sought to have the program remanded for further consideration, arguing violations of the Outer Continental Shelf Lands Act (OCSLA). The Department and API contested the petitioners’ standing and the merits of their claims.The United States Court of Appeals for the District of Columbia Circuit held that the environmental petitioners had associational standing to pursue their claims. On the merits, the court found that the Department of the Interior had satisfied OCSLA’s requirements by reasonably evaluating environmental justice concerns, the selection of representative species for environmental sensitivity analysis, and potential conflicts with other uses of the Gulf. The court concluded that the Department’s decision-making process was reasoned and not arbitrary or capricious. Accordingly, the court denied the petition for review, leaving the 2024–2029 leasing program in effect. View "Healthy Gulf v. Department of the Interior" on Justia Law

Several individuals and organizations, including landowners and agricultural groups, challenged North Dakota statutes governing the underground storage of carbon dioxide and oil or gas, as well as laws permitting pre-condemnation surveys on private property. The plaintiffs own or represent owners of “pore space” in underground geological formations, which is used for carbon dioxide sequestration projects overseen by the North Dakota Industrial Commission (NDIC). The plaintiffs argued that the statutes authorizing amalgamation of pore space and pre-condemnation surveys violate constitutional protections against uncompensated takings and due process, and that certain statutory provisions constitute an improper delegation of legislative power.The District Court of Bottineau County granted summary judgment for the defendants, holding that most of the plaintiffs’ claims were barred by a six-year statute of limitations, as the claims were facial challenges to statutes enacted more than six years prior. The court also found that the plaintiffs’ challenge to the oil and gas storage law was not viable as a facial challenge because it depended on future actions and factual circumstances. The court did not reach the merits of the constitutional claims.The Supreme Court of North Dakota reviewed the case and held that the plaintiffs lacked standing to challenge the constitutionality of the provision allowing the NDIC to grant exceptions (N.D.C.C. § 38-22-03(7)) and the oil and gas storage amalgamation law (N.D.C.C. ch. 38-25), as they had not shown actual or threatened injury. However, the court found that the plaintiffs did have standing to challenge the carbon dioxide storage amalgamation provisions (N.D.C.C. ch. 38-22). The court ruled that the district court erred in dismissing these claims as time-barred, as the claims accrued when the NDIC acted under the statutes, not when the statutes were enacted. The court affirmed dismissal of the pre-condemnation survey law claims, but on the basis of binding precedent, not the statute of limitations. The case was affirmed in part, reversed in part, and remanded for further proceedings. View "Northwest Landowners Association v. State" on Justia Law

This case concerns a dispute over the calculation of nonparticipating royalty interests (NPRI) in oil and gas produced from a tract of land in McKenzie County, North Dakota. The plaintiffs, as trustees of three family trusts, each hold an undivided one-third interest in a 2% royalty on all oil and gas produced from the NW¼NE¼ of Section 31-154-97, based on a 1951 royalty deed. The land in question abuts the Missouri River, and a portion of it lies below the ordinary high-water mark, which is owned by the State of North Dakota. Continental Resources, Inc. operates an oil well on a spacing unit that includes this tract, while third-party defendants own the minerals above the high-water mark, subject to the trusts’ royalty interests.The District Court of McKenzie County previously found that the trusts’ NPRI did not include State-owned acreage below the high-water mark, and adopted Continental’s calculation of the royalty payment factor, which excluded the State’s acreage and included an upward adjustment for equitable distribution. The court also held that Continental’s suspension of royalty payments was permissible under the “safe harbor” provision of N.D.C.C. § 47-16-39.1, denied the trusts’ request for an accounting, and awarded costs to Continental, concluding the trusts were not the prevailing party. The trusts appealed, arguing errors in the NPRI calculation, the application of the safe harbor provision, and the determination of the prevailing party.The Supreme Court of North Dakota reversed the district court’s amended judgment. It held that the 1951 royalty deed unambiguously grants the trusts a 2% royalty on all oil and gas produced from the entire described tract, including State-owned acreage. The court remanded for recalculation of the NPRI, reconsideration of the safe harbor provision, determination of outstanding royalties and accounting, and proper allocation of costs and disbursements, finding the trusts to be the prevailing party. View "Garaas v. Continental Resources" on Justia Law

Several individuals and an LLC, who own oil and gas interests in West Virginia, leased their mineral rights to EQT, a group of related energy companies. The leases, numbering nearly 3,843, required EQT to pay royalties to the lessors. During the period from January 1, 2012, to February 28, 2021, EQT extracted “wet gas” from the wells, which contains valuable natural gas liquids (NGLs) like propane and butane. EQT sold the wet gas at the wellhead to its own affiliates and paid royalties to the lessors based on the energy content (BTU) of the wet gas, not on the value of the NGLs. EQT then separated and sold the NGLs to third parties but did not pay additional royalties for these sales. In 2021, EQT notified lessors it would begin calculating royalties based on the separate value of NGLs and residue gas.The plaintiffs filed a putative class action in the United States District Court for the Northern District of West Virginia, alleging breach of contract and fraudulent concealment, and sought class certification. The district court granted partial summary judgment, finding EQT’s affiliates were its alter egos, and certified classes for both claims, later dividing the class into three subclasses based on lease language. EQT petitioned for interlocutory appeal of the class certification order.The United States Court of Appeals for the Fourth Circuit reviewed the district court’s certification order. The Fourth Circuit affirmed the certification of the breach of contract claim, holding that the class was ascertainable and that common questions of law and fact predominated, given EQT’s uniform royalty payment method and the immateriality of lease language variations under West Virginia law. However, the Fourth Circuit reversed the certification of the fraudulent concealment claim, holding that individual questions of reliance would predominate, making class treatment inappropriate for that claim. Thus, the district court’s order was affirmed in part and reversed in part. View "Glover v. EQT Corporation" on Justia Law

A predecessor of BP America Production Company obtained an offshore oil and gas lease from the United States in 1983. Chevron U.S.A. Inc. later acquired the lease and assigned it to Linder Oil Company, retaining certain deep operating rights. Linder Oil assumed all decommissioning obligations and indemnified Chevron. Linder Oil then assigned its interest to Reserves Management and Destin Resources, who later conveyed interests to Sojitz Energy Venture. Sojitz eventually transferred its interests back, and Linder Oil released Sojitz from decommissioning obligations. The Bureau of Ocean Energy Management required Linder Oil to provide performance bonds, which Lexon Insurance Company issued. After Linder Oil and related entities filed for bankruptcy and failed to complete decommissioning, the government called the bonds, and Lexon paid over $11 million. Chevron and Sojitz completed the decommissioning work, and Lexon sought reimbursement from them and BP America.The United States District Court for the Southern District of Texas reviewed cross-motions for summary judgment based on stipulated facts. The magistrate judge recommended summary judgment for the defendants, finding Lexon was not entitled to reimbursement under theories of subrogation, contribution, or unjust enrichment, primarily because Louisiana law did not support Lexon’s claims. The district judge adopted this recommendation and dismissed Lexon’s claims.The United States Court of Appeals for the Fifth Circuit affirmed the district court’s dismissal. The Fifth Circuit held that federal law, including 31 U.S.C. § 9309, did not provide Lexon with a right to subrogation against the defendants, and that any gap in federal law was properly filled by Louisiana law, which did not entitle Lexon to subrogation, contribution, or unjust enrichment recovery under the circumstances. The court concluded that Lexon had no recourse against the defendants as required by Louisiana law and that any enrichment of the defendants was contractually justified. View "Lexon Insurance v. Chevron U.S.A." on Justia Law