Power companies ask Supreme Court to strike down nuclear power subsidies; Supreme Court denies petitions for writs of certiorari (update)

Update:  On April 15, 2019, the U.S. Supreme Court denied, without decision, two petitions for writs of certiorari that were filed by one of the nation’s leading trade associations representing independent power producers. Those cases alleged, among other things, that ZEN legislation out of both New York and Illinois were preempted by federal law. The Court upheld the dismissal of the complaint in each case, and the Zero Emission Nuclear (ZEN) legislation in New York and Illinois was effectively upheld as not in violation of the Federal Power Act.

On January 7, 2019, the Electric Power Supply Association, one of the nation’s leading trade associations representing independent power producers, filed two petitions for writs of certiorari with the U.S. Supreme Court. The writs for cert arise from appeals of a Second Circuit Court of Appeals decision, which is summarized here, and a Seventh Circuit Court of Appeals decision, which is summarized here, that both upheld state subsidies for nuclear power generation facilities in New York and Illinois, respectively. The question presented by both appeals is “[w]hether the [Federal Power Act (FPA), 16 U.S.C. § 791a et seq.] preempts only state subsidies that explicitly require a wholesale generator to sell its output in FERC-approved auctions, or whether the FPA also preempts state subsidies that lack such an express requirement but that, by design, subsidize only generators that sell their entire output via such auctions, thereby achieving the same effect.”

Both petitions urged the Court to recognize the great importance of the decisions from the Second Circuit and Seventh Circuit if upheld. “The economic and policy stakes are enormous,” and the subsidies will grossly distort market outcomes. “Unless this Court intervenes, these subsidy schemes will impose huge costs and threaten serious distortions of the FERC-authorized mechanisms for setting wholesale rates at economically efficient levels and sending appropriate price signals to wholesale market participants.” To the petitioners, the decisions ratify “a fundamental transfer of regulatory authority to the States and away from the federal government and its policy of relying on market forces to set just and reasonable wholesale rates and send economically efficient signals regarding market entry and exit.”

This case will have major ramifications across the country but particularly here in Ohio, as the outcome could work to either essentially permit or effectively preempt future attempts at providing nuclear subsidies to failing generation facilities. The response date for both petitions has been set for February 7, 2019.

National, Oil & Gas Litigation

Supreme Court review denial favors pipeline company

On January 22, 2019, the U.S. Supreme Court denied review of a Fourth Circuit decision affirming the dismissal of an action brought by landowners in the Western District of Virginia. The action sought to prohibit the Federal Energy Commission (FERC) from issuing a Certificate of Public Convenience and Necessity to Mountain Valley Pipeline LLC, which would provide eminent domain authority to the pipeline company. For more, read the full story.  

National, Oil & Gas Litigation

Sixth Circuit upholds immediate access for NEXUS pipeline construction

The Sixth Circuit recently confirmed an interstate natural gas pipeline company’s ability to seek and obtain immediate access to property, prior to a just compensation hearing. In Nexus Gas Transmission, LLC v. City of Green, No. 18-3325 (Dec. 7, 2018), the Sixth Circuit joined several other circuit courts that have followed the Sage approach, which recognizes the ability of a pipeline company, having established the substantive right to condemn under the Natural Gas Act (NGA), to obtain an injunction granting it access to property in order to construct the pipeline, prior to final condemnation. The Sixth Circuit rejected the argument raised in an amicus curiae brief that the Sage approach goes against Congressional intent (arguing that Congress had not provided for statutory “quick take” in the NGA). The Sixth Circuit also found that the District Court had not erred in finding NEXUS had established the preliminary injunction factors, including that the public interest will be served by allowing immediate access.   

National, Oil & Gas Litigation

Ohio law requires oil and gas land professionals to hold broker’s license to be compensated

On September 25, 2018, the Ohio Supreme Court issued its decision in Thomas Dundics v. Eric Petroleum, Slip Opinion No. 2018-Ohio-3826, holding that the plain language of Ohio Revised Code 4735.01 does not exclude oil and gas land professionals or oil and gas leases from the definitions of “real estate” and “real estate broker” within the statute. The case considered the specific question of whether “oil-and-gas land professionals, who help obtain oil-and-gas leases for oil-and-gas development businesses, must be licensed real-estate brokers when they engage in the activities described in R.C. 4735.01(A) with respect to oil-and-gas leases,” and “[m]ore specifically, … whether R.C. 4735.21 precludes a person who is not a licensed real-estate broker from bringing a cause of action to recover compensation allegedly owed for negotiating oil-and-gas leases." For more, read the full story

Ohio, Oil & Gas Litigation

7th Circuit Court of Appeals affirms Illinois subsidy for nuclear generation facilities

On September 13, 2018, the Seventh Circuit Court of Appeals issued its long-awaited decision in the consolidated cases of Elec. Power Supply Assn. v. Anthony M. Star, 7th Cir. Nos. 17-2433, 17-2445, 2018 U.S. App. LEXIS 25980 (Sep. 13, 2018).  The decision — authored by the well-known jurist, Circuit Judge Frank Easterbrook — decided an issue that is very similar to an issue also currently pending before the United States Court of Appeals for the Second Circuit, the case of Coalition For Competitive Electricity, et al. v. Zibelman, et al., 2nd Cir. No. 17-2654. The issue in question is namely whether the Federal Power Act preempts a state law that sought to subsidize some of the state’s nuclear generation facilities. The Federal Power Act provision— 16 U.S.C. § 824(b)(1) — provides that the Federal Energy Regulatory Commission (FERC) is to regulate the sale of electricity in interstate commerce, whereas the states are to regulate local distribution and the facilities used to generate power. For more, read the full story

Ohio, Oil & Gas Litigation

Ohio's Fifth District Court of Appeals issues a decision on unitization

On August 13, 2018, the Ohio Fifth District Court of Appeals issued a decision in Am. Energy-Utica, LLC v. Fuller, 2018-Ohio-3250, holding that an order unitizing the landowner’s parcel under R.C. 1509.28 after the landowner chose not to voluntarily consent to the unit “retroactively impair[ed] the obligation of the contract,” namely a provision in the landowner’s oil and gas lease stating, “UNITIZATION BY WRITTEN AGREEMENT ONLY.” In this case, Fuller executed an oil and gas lease in 1981, covering a 40-acre parcel, that contained no explicit restrictions on the formations or depths covered by the lease and included handwritten changes that crossed out the provision allowing for unitization and, instead, provided: “UNITIZATION BY WRITTEN AGREEMENT ONLY!”  After a series of assignments, American Energy-Utica, LLC acquired the deep rights under the Fuller parcel. American Energy approached Fuller to execute an amendment to allow for unitization of the Fuller parcel. The parties were unable to reach an agreement, and Fuller refused to consent to the unit. American Energy then included his parcel in a unitization application to ODNR under R.C. 1509.28.

In the case, American Energy filed a claim for injunctive relief to gain access to the Fuller property to conduct seismic testing, as well as an application with ODNR to force a portion of Fuller’s property into a drilling unit. Fuller filed a counterclaim for breach of the lease agreement provision related to unitization by written agreement only. The trial court held that the oil and gas lease covered all formations under the property and that “R.C. 1509.28 permits the unitization of the lease.” On appeal, the Fifth District reversed the trial court’s decision on unitization, relying on the Ohio Supreme Court’s decision in Burtner-Morgan-Stephens Co. v. Wilson, 63 Ohio St.3d 257 (1992). The Fifth District held that application of R.C. 1509.28 in this case constituted breach of the express provisions of the lease. 

Ohio, Oil & Gas Litigation

Bill protecting oil and gas producers from new tax policy passes Ohio legislature

An Ohio Department of Taxation audit led the state agency to conclude that oil and gas producers are no longer exempt from sales taxes on several necessary capital expenditures, according to Columbus Business First.  House Bill 430, which was crafted to protect producers from these taxes passed the Ohio House and Senate, and recently received Gov. John Kasich’s signature for approval. State Rep. Tim Schaffer, R-Lancaster, said he introduced the bill to protect mom-and-pop production companies and hundreds of jobs. For more, read the full story

Ohio, Oil & Gas Litigation

PA Supreme Court: Oil and gas wells may not be an acceptable use in certain residential/agricultural zoned areas

In a 4-3 decision, the Pennsylvania Supreme Court, in Gorsline v. Board of Supervisors of Fairfield Township, J-13-2017, 2018 Pa. LEXIS 2781 (June 1, 2018), announced a ruling that may impact shale gas development in non-industrially zoned areas throughout Pennsylvania. In the case, Fairfield Township approved an application to permit Inflection Energy, LLC to drill multiple gas wells in a residential-agricultural zoned area. The issuance of the permit was based upon the township board of supervisors’ determination that the drilling and operation of the wells was “similar to and compatible with the other uses permitted in the zone” where the property is located and that the wells constituted a “public service facility” under the local zoning code. Two local families appealed the township’s decision.

The trial court overturned the decision to permit the oil and gas wells, finding that the board’s classification of the wells as “similar to” a “public service facility” was not supported by substantial evidence. The intermediate appellate court reversed the trial court, finding that the oil and gas company’s proposed use was similar to and compatible with a “public service facility” and/or an “essential service.” The Pennsylvania Supreme Court found that the board’s determination to permit the wells as “similar to and compatible with” a “public service facility” or “essential service” was an error as a matter of law. The Court reasoned that the proposed drilling did not demonstrate any benefit to the local community such that it could be considered a public service facility but indicated its decision did not decide that all oil and gas development in residential or agricultural zones is unacceptable as a matter of Pennsylvania law. In fact, the Court noted that the Pennsylvania Municipalities Planning Code specifically “permits the governing body of a municipality to amend its zoning ordinances to permit oil and gas development in any or all of its zoning districts.” For more, read the full Pittsburgh Post-Gazette story.

Oil & Gas Litigation, Pennsylvania

Ohio Supreme Court to review Youngstown ballot issue on hydraulic fracturing

For the third time since 2015, the Ohio Supreme Court is being asked to decide whether a Youngstown initiative to ban hydraulic fracturing used in oil and natural gas operations will be in front of city voters, reports the Youngstown Vindicator. The newspaper says attorneys representing four city residents, who back the charter amendment effort, filed a writ of mandamus with the Court against the Mahoning County Board of Elections and its four members. The filing seeks to overturn the board’s March 13, 2018 decision to keep the proposal off the city’s May 8th primary election ballot, according to the Vindicator. For more, read the full story.

Ohio, Oil & Gas Litigation