November 2009
From the editors of Wolters Kluwer Law & Business, this update describes
important developments from CCH energy publications.
If you have any comments or suggestions concerning the information provided or the format used, we'd like to hear from you. Please send your comments to pamela.maloney@wolterskluwer
Global Warming
Global Warming/Nuisance Suit Against
Energy Companies May Proceed
Residents and owners of land
along the Mississippi Gulf Coast were allowed by the U.S. Court of Appeals
for the Fifth Circuit to bring a class action suit against energy, fossil
fuels, and chemical companies for their alleged contributions to global
warming, reversing a decision by a lower court. The suit alleged that
the companies had created a public nuisance by emitting greenhouse gases,
which contributed to global warming and allegedly made Hurricane Katrina
more damaging than it would have been otherwise, destroying their private
property in addition to causing damage to public property. The landowners
also filed trespass claims which asserted that the companies’ greenhouse
gas emissions caused saltwater, debris, and various hazardous substances
to enter and damage their property. Finally, negligence claims asserted
that the defendants had a duty to conduct their businesses in a way to
avoid unreasonably damaging the environment, public health, public and
private property, and that the defendants breached this duty. (Ned
Comer, et al. v. Murphy Oil USA, et al. (5th Cir) Docket No. 07-60756,
October 16, 2009, CCH Utilities Law Reports, Report No.
1506, October 30, 2009).
Electric Utilities
FPL Fined $25,000,000 for 2008 Blackout
The Commission has approved
a $25 million civil penalty as part of a settlement with Florida Power
& Light Co. (FPL) stemming from a February 2008 blackout that lost
power for millions of consumers in South Florida for several hours. FPL
also has agreed to a broad program of remedial measures to enhance its
system and operations to prevent another such occurrence. This settlement
represents FERC’s first civil penalty assessment under it Electric
Reliability Standards and its first joint enforcement effort with the
North American Electric Reliability Corporation (NERC), the FERC-designated
Electric Reliability Organization. Of the civil penalty, FPL will pay
$10 million to NERC to offset the budget charges it assesses industry
members. FPL will also pay $10 million to the U.S. Treasury and another
$5 million for extra reliability enhancements for its system that go beyond
the minimum requirements. (Florida Blackout, 129 FERC ¶61,016)(ip
access users) (Intelliconnect)
Agencies Agree on Rules for Transmission
Siting on Federal Lands
Nine federal departments and agencies have signed a Memorandum
of Understanding (MOU) to make it faster and simpler to build transmission
lines on federal lands. The goal of the agreement is to speed approval
of new transmission lines, reduce expense and uncertainty in the process,
generate cost savings, increase accessibility to renewable energy and
jumpstart job creation. The MOU has been signed by the U.S. Department
of Agriculture, Department of Commerce, Department of Defense, Department
of Energy, Environmental Protection Agency, the Council on Environmental
Quality, the Federal Energy Regulatory Commission, the Advisory Council
on Historic Preservation, and the Department of the Interior. The agreement
will cut the approval time of the normal federal permit process and help
break down the barriers to siting new transmission lines by: (1) Designating
a single federal point-of-contact for all federal authorizations; (2)
Facilitating coordination and unified environmental documentation among
project applicants, federal agencies, states and tribes involved in the
siting and permitting process; (3) Establishing clear timelines for agency
review and coordination; and (4) Establishing a single consolidated environmental
review and administrative record. Instead of applicants going to multiple
agencies, a single lead agency will coordinate all permits and approvals.
The new process will keep applications on track by requiring agencies
to set and meet clear deadline and improve transparency by creating a
single record to be posted on line. The MOU does not alter the authority
of any participating agency, and all existing environmental reviews and
safeguards are maintained fully. (CCH Energy Management,
Issue No. 1304, Multiple Agency Press Release, October 28, 2009)
Private Right of Action Not Involved
Two parties requested rehearing of a Commission
decision [128 FERC ¶61,182]
(ip
access users)(Intelliconnect)
allowing the Connecticut Attorney General to proceed with a complaint
against he ISO New England (ISO-NE) for possible installed capacity transition
payments for the provision of service that was never provided or intended
to be provided. Brookfield Energy Marketing Inc. (Brookfield) raised four
issues on rehearing. First, that there was no private right of action
to file a market manipulation action. Second, that by setting the matter
for hearing the Commission made an unexplained departure from is well-established
practice for handling manipulation claims. Third, that the Commission
erred by setting unsubstantiated allegations for hearing. Finally, Brookfield
contended that the Hearing Order failed to provide essential specifications
concerning the scope of the evidentiary hearing. The Commission determined
that no litigant brought a “private action,” nor had the Commission
permitted a third party to prosecute such a “private action.”
The Connecticut Attorney General simply exercised his statutory rights
to bring a complaint to the Commission and the Commission decided to exercise
its statutory prerogative to determine whether any provisions of the Federal
Power Act had been violated. Further, the Commission found that there
was no departure from established principles in setting the issues for
hearing. Lastly, the Commission clarified that it intended to set for
hearing inquiry the three requisite elements to establish market manipulation
and granted rehearing in part to clarify that the scope of the hearing
was whether capacity importers submission of energy who supply offers
at or near the $1,000 per MWh price cap satisfied the three elements required
to establish market manipulation. (Richard Blumenthal, Attorney General
for the State of Connecticut v. ISO New England Inc., et al., 129
FERC
¶61,057) (ip
access users) (Intelliconnect)
Conduct Standards for Transmission
Providers Affirmed
The Commission has affirmed
its basic determinations in Order No. 717 (FERC Statutes and Regulations
Edition ¶31,280
(ip
access users) (IntelliConnect)
) and grants rehearing and clarification regarding these recently issued
standards of conduct for transmission providers. The reforms adopted in
Order No. 717 were intended to eliminate the elements that have rendered
the Standards difficult to enforce and apply. For example, consistent
with Commission findings in Order No. 717 that a public utility or interstate
natural gas pipeline that does not engage in any transmission transactions
with a marketing affiliate should be excluded from the standards' coverage,
the agency has clarified that the term ``marketing function employee''
of a transmission provider does not include an employee of an affiliate
that does not engage in transmission transactions on the affiliated transmission
provider's transmission system. It has also confirmed that an employee
who makes sales of electric energy is performing a marketing function
only if the employee works for a public utility transmission provider
or a company affiliated with such a provider. The Commission has further
clarified that personnel who balance load with energy or generating capacity
are not considered ``transmission function employee[s]'' under the standards
where the balancing authority and transmission functions are separate,
and the employee does not perform duties or tasks of a transmission function
employee. . (FERC Statutes and Regulations Edition ¶31,297
(ip
access users) (IntelliConnect))
Clarification of QF Status Form Proposed
The Commission is proposing
to remove the contents of the Form No. 556, which currently is used in
the certification of qualifying status for an existing or proposed small
power production or cogeneration facility, from its regulations, and,
in their place, to provide that an applicant seeking to certify qualifying
facility (QF) status of a small power production or cogeneration facility
must complete, and electronically file, the Form No. 556 that is in effect
at the time of filing. The Commission proposes to revise and reformat
the Form No. 556 to clarify the content of the form and to take advantage
of newer technologies that will reduce both the filing burden for applicants
and the processing burden for the Commission. Specifically, FERC proposes
to include data controls, automatic calculations, error handling and other
programmatic features to assist applicants and maintain data quality in
Form No 556. The revised form would also contain geographic coordinates
of facilities, more specific ownership information, and a simpler method
of certifying compliance with the Commission's fuel use requirements for
small production facilities. (FERC Statutes and Regulations Edition
¶32,648
(ip
access users) (IntelliConnect))
Natural Gas
Replacement Shipper Discounting Policy
Ordered
The Commission determined that
pipelines should apply the Commission’s existing selective discounting
policy on a case-by-case basis in deciding whether to grant a discounted
or negotiated usage or fuel charge to an asset manager replacement shipper,
subject to a general requirement of no undue discrimination. The Commission
refused to establish a blanket requirement that pipelines must always
provide the same discounted or negotiated usage or fuel charges to an
asset manager replacement shipper that it had provided to the primary
firm shipper. Application of the Commission’s existing policy would
protect asset manager replacement shippers from undue discrimination with
regard to receiving the benefit of discounts or negotiated rates provided
to a releasing shipper while also protecting pipelines against unintended
expansion of the rights originally provided to the releasing shipper.
Applying the existing selective discounting policy in the asset management
agreement (AMA) context protected asset manager replacement shippers that
were actually using the capacity in the same manner and on the same terms
as the releasing shipper, and the policy was thus consistent with Order
No. 712. Therefore, if an asset manager replacement shipper was similarly
situated to the releasing shipper, the pipeline must pass through the
discounted negotiated rate to the asset manager. (Texas Eastern Transmission
LP, et al., 129 FERC ¶61,031
(ip
access users) (Intelliconnect))
Oil
Line Fill Policy Set for Hearing
BP Canada Energy Marketing Corp.’s
(BP) complaint against Kinder Morgan Cochin LLC (Kinder) challenging Kinder’s
Line Fill Policy was set for hearing by the Commission. Line fill is the
inventory or volume of product required in a pipeline at all times to
maintain pressure and ensure uninterrupted flow or transportation and
delivery. BP alleged that the Line Fill Policy had expired by its own
terms but that Kinder continued to apply it. The Commission found that
BP’s and Kinder’s statement’s revealed differing interpretations
of Kinder’s tariff, its Line Fill Policy, and whether the Line Fill
Policy remained in effect. Both firms disagreed as to whether the Line
Fill Policy as applied was unjust, unreasonable, or unduly discriminatory.
The hearing was meant to ascertain the duration and extent of the existing
Line Fill Policy, the relevance of BP’s affiliate’s interest
in the Fort Saskatchewan Facility, the relevance of the Interstate Commerce
Act, and whether the Line Fill Options were structured to force BP to
elect an option that imposed on it an unreasonable or unduly discriminatory
share of line-fill responsibility on the Kinder pipeline system. (BP
Canada Energy Marketing Corp. v. Kinder Morgan Cochin LLC, 129 FERC
¶61,085
(ip
access users) (Intelliconnect))
Liquefied Natural Gas
States Can’t Block LNG Terminal
by Inaction
The Rhode Island Coastal Resources
Management Council’s (CRMC) use of its state law licensing program
for alterations to its coast to block the construction of a liquefied
natural gas (LNG) terminal was preempted by the Natural Gas Act, the U.S.
Court of Appeals for the First Circuit held. The Federal Energy Regulatory
Commission (FERC) had approved Weaver Cove Energy’s application
to build the LNG terminal, an offshore berth, and a pipeline, all of which
would be located in Massachusetts or Massachusetts waters. However, the
project required that a federal navigation channel in Rhode Island waters
be dredged to ensure safe passage of the LNG tankers. Upholding the district
court, the appellate court found that Rhode Island’s refusal since
2004 to act on Weaver’s Cove’s application to approve the
dredging was a use of state law that delayed the ultimate licensing of
the FERC-approved terminal and necessarily conflicted with the federal
process. (Weaver’s Cove Energy, LLC v. Rhode Island Coastal
Resources Management Council (1stCir ), CCH Utilities Law
Reporter ¶14,757)
Nuclear Power
Criminal Penalties Imposed for Bringing
Weapons into Plants
Persons without authorization
who introduce weapons or explosives into protected areas of specified
types of facilities subject to the regulatory authority of the NRC will
be subject to federal criminal penalties beginning April 12, 2010. Penalties
for violation include fines ranging up to $5,000 and prison sentences
of up to one year. The new rule applies to NRC-licensed facilities that
have protected areas or other areas that contain special nuclear material,
byproduct material, or source material. The facilities covered include:
(1) nuclear power plants; (2) high-level waste storage or disposal facilities;
(3) independent spent fuel storage installations; and (4) uranium enrichment
facilities, uranium conversion facilities; and nuclear fuel fabrication
facilities. Previously, the NRC could take action against its licensees
for violation of security requirements resulting from the unlawful introduction
of weapons onto the site, but the Department of Justice could not bring
a criminal prosecution against the individual who brought the weapons
on site without authorization. Instead, any criminal sanctions had to
be sought by the state under state law.(CCH Nuclear Regulation
Reporter ¶9321c)
Rancho Seco Plant Released for Unconditional
Use
A request
by Sacramento Municipal Utility District (SMUD) to release most of the
Rancho Seco nuclear power plant site near Herald, California for unrestricted
public use has been approved by the Commission. The contamination level
of the land, approximately 80 acres, falls below NRC regulatory requirements
that allow a maximum radiation dose of 25 millirem per year from residual
contamination. (The average person in the United States receives about
300 millirem a year from background, or natural, radiation.) Rancho Seco’s
NRC licenses will still apply to a low-level radioactive waste storage
building and a dry-cask storage facility for spent nuclear fuel. The total
land remaining under license is about six acres. SMUD remains responsible
for the security and protection of this land and the waste storage facilities,
and is required to maintain $100 million in liability insurance coverage
until all radioactive material has been removed from the site. (CCH
Nuclear Regulation Reporter, No. 1427, October 27, 2009)
Oil Shale Program Reformed
Secretary of the Interior Ken Salazar
announced that the Department of the Interior was offering additional
opportunities for energy companies to conduct oil shale research, development,
and demonstration (RD&D) projects on public lands in Colorado, Utah,
and Wyoming. In addition, the Secretary asked the Department’s Inspector
General to investigate a set of lease addenda that the previous administration
entered into with the holders of six existing RD&D leases on January
15, 2009. The addenda contained favorable conditions and low royalty rates
that were offered five days before the end of the previous administration—to
energy companies holding existing RD&D leases. The Secretary determined
that the timing and circumstances of the previous administration’s
modifications of existing RD&D leases—called addenda—merited
additional review. (Department of the Interior Press Release, October
20, 2009, CCH Energy Management, Report No. 1305, November
12, 2009)