EPA announces plan to loosen restrictions on methane for energy industry

The U.S. Environmental Protection Agency (U.S. EPA) recently announced plans “to loosen federal rules on methane by allowing oil and gas operators to largely police themselves,” The Washington Post reports by eliminating federal requirements that oil and gas companies install technology to detect and fix methane leaks from wells, pipelines and storage facilities. U.S. EPA Administrator Andrew Wheeler said the proposal removes “unnecessary and duplicative” regulatory burdens, according to the article. Anne Idsal, assistant administrator of the U.S. EPA’s Office of Air and Radiation, said U.S. EPA will continue to require gas and oil companies to limit the release of “volatile organic compounds,” including methane, “but only during drilling and processing.” The proposal also challenges whether the federal government has the authority to regulate methane “without first making a detailed determination that it qualifies as a pollutant under the Clean Air Act.” The plan is particularly notable because major energy companies are split on the rollback. For more, read the full article.

National, Oil & Gas Litigation

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