Energy & Environmental Law Blog

Energy & Environmental Law Blog

Analyzing the critical energy and environmental issues of the day

California Air Resources Board-Commissioned Report Recommends Ways to Avoid Price Volatility in California’s Cap and Trade Market

Posted in California, Cap and Trade

Concerned about the potential for price volatility in its cap and trade program, the California Air Resources Board (CARB) commissioned the Market Simulation Group (MSG) at the University of California Energy Institute to look at the issue and make recommendations.  The MSG issued its report last month, entitled “Report of the Market Simulation Group on Competitive Supply/Demand Balance in the California Allowance Market and the Potential for Market Manipulation.

Read More

FERC’s $3,250,000 Enforcement Action Against the Arizona Public Service Company Provides Guidance for an Effective Compliance Program

Posted in Federal, FERC, NERC

FERC’s enforcement action with regard to the Arizona Public Service Company (“APS”) provides some instructive guidance for all regulated utilities as to what FERC’s Office of Enforcement deems to be an effective compliance program.  Read More

Comment Period Extended on Expansion of Critical Habitat Rules

Posted in Federal, Land Use

The Fish and Wildlife Service and National Oceanic and Atmospheric Administration announced last week that they are extending the deadline for comments on new critical habitat rules from July 11 to October 9, 2014.  The proposed rules were announced in May.  79 FR 27060 (May 12, 2014).  The agencies propose a revision of the term “destruction or adverse modification,”  extending it to both occupied and unoccupied habitat areas necessary for “conservation” of the species.  The agencies observed that “conservation” includes both survival and recovery, and that inclusion of unoccupied habitat was consistent with federal court ruling in several cases. However, for purposes of listing a species, the agencies have just published notice of a final binding policy statement on the interpretation of the term “significant portion of its range” – a key element of the Endangered Species Act – limiting “range” to areas actually occupied by the species.  http://www.regulations.gov at Docket Number FWS-R9-ES-2001-0031. Read More

FERC Adopts New Methodology to Determine Electric Utility ROE

Posted in FERC

In a long-awaited decision, the Federal Energy Regulatory Commission on June 19, 2014, revised its methodology for determining the rate of return on common equity (ROE) used to establish cost-based rates of public utilities subject to FERC jurisdiction.  In Martha Coakley, et al. v. Bangor Hydro Electric Company, et al., 147 FERC ¶ 61,234 (2014) (FERC Docket No. EL11-66-000), the FERC adopts a two-step DCF methodology used in natural gas pipeline rate cases which utilizes both short-term and long-term growth projections.  In the two-step DCF methodology adopted for electric utilities, the short-term forecast will receive a two-thirds weighting and the long-term forecast will receive a one-third weighting in calculation of the growth rate for the DCF model.  The short-term growth estimate is to be based on the five year projections by IBES (or a comparable source), and the long-term growth estimate is to be based on the average of the GDP growth rates.  FERC will apply the new methodology prospectively and to any pending ROE complaint proceeding in which a decision has not yet been made.  Read More

Fish and Wildlife Announces In-Depth Review of Eagle Management Policy

Posted in Federal, NEPA

The U.S. Fish and Wildlife Service announced last week that it intended to conduct either a NEPA environmental assessment (EA) or an environmental impact statement (EIS) concerning its bald and golden eagle management policies.  The decision on whether the report will be an EA or and EIS will be determined by the volume and complexity of the comments receiving during the ninety day scoping period to be announced in the Federal Register today.  Although the analysis will include evaluation of the length of incidental take permits, the FWS said the announcement had nothing to do with the suit filed last week by the American Bird Conservancy (as discussed in a prior blog post on this subject) challenging the failure to conduct a NEPA analysis of an increase in the duration of incidental take permits for bald and golden eagles from five years to up to thirty years. Read More

One Step Closer… Fifth Circuit Affirms BP Loss on CWA Liability Regarding Gulf Spill

Posted in Litigation, Water Law

The Deepwater Horizon spill in the Gulf of Mexico occurred over four years ago, accompanied by numerous stories trumpeting the fact that BP would likely pay as much as $25 billion to the United States in civil penalties alone.  With numbers like that in the air, and a judge who has forced the parties to move forward in litigation, typically a settlement follows.  Not in this case however.  But with a recent decision by the Fifth Circuit Court of Appeals, the dynamic might change.

There have been some settlements in the Clean Water Act penalty action brought by the US.  Moex, a 10% passive investor in the BP lease, quickly settled its Clean Water Act (CWA) civil penalty liability to the US for approximately $80 million.  That was the largest CWA civil penalty ever entered until Transocean, as owner and operator of the Deepwater Horizon, settled its CWA civil penalty liability for $1 billion.

BP and its other minority partner, Anadarko, however, chose to fight.   That decision was not entirely surprising.  At that time, with memories of the spill and its aftermath still fresh, the public pressure for a massive civil penalty was enormous, and BP may have felt that delaying negotiations might temper that.  Perhaps more important, not long after the Deepwater Horizon CWA penalty action was filed, another oil company, Citgo, had become the first defendant to take a CWA penalty case to trial since the penalty provisions were significantly strengthened by the Oil Pollution Act of 1990, and had been hit with penalties far lower than demanded by the US in settlement.

Indeed, BP and Anadarko took Citgo one step farther, and argued that not only did their liability not amount to billions of dollars, they had no CWA civil penalty liability at all.

BP and Anadarko argued that CWA penalty liability is imposed on owners of facilities from which oil is discharged.  They were admittedly owners of the well in the floor of the Gulf.  But they argued that the discharge was not from the well to the ocean, but was from the riser that connected the well opening to the Deepwater Horizon drilling rig.  That riser had broken off, causing oil to gush from the well through the riser into the ocean.  Hence, Transocean, as the owner of the riser connected to the Deepwater Horizon, should be liable for any civil penalty, not BP and Anadarko.

Neither the trial nor the appellate court gave the argument much credence. The District Court held that the point of discharge is the point where the uncontrolled movement of oil began, and that was at the well, finding against BP and Anadarko and for the US on cross motions for summary judgment.  The Court of Appeals affirmed on June 4, 2014, in a terse 10 page opinion.  Rejecting Anadarko’s effort to reframe the discharge question as being the point where oil “enters the marine environment,” the court noted that there was no legal support for that position, and that once the cement in the well had failed, oil “‘flowed freely’ from the well and ultimately into navigable waters.”  The court cited numerous decisions where liability had been imposed on the source facility regardless of whether the oil had flowed over intervening property or through ditches before reaching navigable waters.  Since BP and Anadarko did not dispute ownership of the well, it affirmed their liability for civil penalties under the CWA.

EPA Fixes Due Date for Comments on Its Proposed Regulations of Carbon Emissions from Existing Power Plants

Posted in Climate Change, EPA, Federal

Today, the EPA has published in the Federal Register the official version of its proposed regulations to curb carbon dioxide emissions from existing power plants under Section 111(d) of the Clean Air Act. 79 Fed. Reg. 34830. You can find the official version here.

Public comments on the proposed regulations will now be due on October 16, 2014. Four public hearings will be held at sites across the country during the last week in July.

In subsequent blog posts, we will begin to examine some of the legal issues on which the EPA has specifically requested comments.

EPA Proposes to Amend All Appropriate Inquiries Rule to Remove References to 2005 ASTM Standard for Phase 1 Assessments

Posted in EPA

Earlier today  EPA published for comment notice of its intent to amend the “All Appropriate Inquiries Rule,” 40 CFR part 312, to remove references to ASTM E1527-05 “Standard Practice for Environmental Site Assessments:  Phase 1 Environmental Assessment Process (“2005 ASTM Standard”).  The Rule currently recognizes compliance with the 2005 ASTM standard as satisfying the Rule.  Comments must be received within 30 days of publication of the notice.

The ASTM amended the 2005 ASTM Standard in 2013.  EPA initially proposed that both the 2005 and 2013 ASTM Standards were compliant with the All Appropriate Inquiries Rule.  After receiving comments expressing concern that recognizing both standards would create confusion, EPA published a final regulation at 78 FR 79319 (December 30, 2013), providing that the 2013 standard was compliant, and indicating that EPA would later publish a proposed amendment to remove the reference to the 2005 ASTM Standard.  The proposed amendment will go into effect one year after publication of the final rule. In its notice, EPA stated that for property transactions completed before the effective date of the proposed amendment, compliance with ASTM E1527-05 will still satisfy the All Appropriate Inquiries Rule.

Kids Get Their Day in Court on Climate Change

Posted in Climate Change, Northwest

On June 11, the Oregon Court of Appeals held that two teens are entitled to a judicial declaration of whether there exists a “public trust” obligation in state officials to “protect the State’s atmosphere as well as the water, land, fishery, and wildlife resources from the impacts of climate change.”  In Chernaik v. Kitzhaber, the court reversed the trial judge’s dismissal of the case and remanded for a decision on the merits. Read More

Federal Agencies Extend Public Comment on Proposed Clean Water Act Rules

Posted in EPA, Federal, Water Law

Responding to numerous requests from stakeholders, the Army Corps of Engineers and the Environmental Protection Agency will be accepting public comments for an additional three months on the agencies’ proposed definition of the scope of federal jurisdiction over the nation’s water bodies. The new deadline for public comments is October 20, 2014.  For more information about the proposed rules, see our prior post on this topic.