Justia U.S. 5th Circuit Court of Appeals Opinion Summaries

Articles Posted in Energy, Oil & Gas Law
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The Louisiana Public Service Commission (“LPSC”) petitioned the Fifth Circuit for a writ of mandamus compelling the Federal Energy Regulatory Commission (“FERC”) to resolve several of its complaints before the agency related to a ratemaking dispute with System Energy Resources, Inc. (“SERI”), operator of the Grand Gulf Nuclear Station.   The Fifth Circuit concluded that FERC has yet to provide the court with sufficient explanation for its delay despite ongoing irreparable harm to consumers. Accordingly, the court ordered FERC to provide the court—within 21 days—with a meaningful explanation for the length of time the Commission takes for final action in Section 206 complaint proceedings, including those at issue here. View "In re: LA Pub Svc Comm" on Justia Law

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Electric Reliability Council of Texas, Inc. (“ERCOT”) determines market-clearing prices unless otherwise directed by the Public Utility Commission of Texas (“PUCT”). ERCOT is the sole buyer and seller of all energy in Texas. According to the operative complaint, during winter storm Uri ERCOT and the PUCT allegedly “intervened in the market for wholesale electricity by setting prices [that were] orders of magnitude higher than what market forces would ordinarily produce.”   Just Energy, a retail energy provider, purports that after the storm, ERCOT “floored” it with invoices totaling approximately $335 million. Just Energy commenced bankruptcy proceedings in Canada and filed this Chapter 15 case in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. Just Energy challenges its invoice obligations. At the hearing on ERCOT’s motion to dismiss, the bankruptcy court stated that it would strike various language like, “subject to reduction only after a finding by the Court concerning a legally appropriate energy price per megawatt hour as proven by expert testimony, if appropriate, but in no event greater than the price per megawatt hour in effect after market forces took effect.” By striking this and similar language sprinkled throughout the complaint, the court concluded that “this change solves the abstention problem.”    The Fifth Circuit disagreed and vacated the bankruptcy court’s order and remanded with instructions to determine the appropriate trajectory of this case after abstention. The court explained that abstention under Burford6\ is proper because: (1) the doctrine applies in the bankruptcy context; and (2) four of the five Burford factors counsel in favor of abstention. View "Electric Reliability v. Just Energy" on Justia Law

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Petitioners Shrimpers and Fishermen of the RGV, Sierra Club, and Save RGV from LNG (collectively, “Petitioners”) challenge the issuance of a Clean Water Act (“CWA”) permit by the U.S. Army Corps of Engineers (the “Corps”). Petitioners allege that the Corps’ permit issuance violated the CWA and its implementing regulations.   The Fifth Circuit denied the petition for review, holding that the Corps approved the least environmentally damaging practicable alternative presented before it during the permitting process and did not act arbitrarily in its evaluation of pipeline construction impacts and mitigation efforts. The court explained Petitioners’ first set of arguments centers on the Corps’ estimation that restoration will occur within one year. They state that the Corps did not consider the full construction period when quantifying the duration of impacts, which they allege is improper. However, they supply no evidence that the construction period must be, or even that it typically is, included when assessing whether impacts are temporary.   Further, the Corps’ analysis also comports with the EIS, which estimates that herbaceous vegetation will regenerate “within 1 to 3 years.” The EIS estimation necessarily includes the finding that vegetation may revegetate in one year, as the Corps concluded. Finally, the EPA feedback Petitioners relied upon does not consider the approved compensatory mitigation plan or the special conditions of the permit because the comments are from 2015 and 2018— well before the current permit (and even the original permit) was approved. The Corps considered this feedback and aligned its ultimate approach with the EPA’s recommendations. View "Shrimpers v. United States Army Corps" on Justia Law

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Appellant Sanare Energy Partners, L.L.C. agreed to purchase a mineral lease and related interests from Appellee PetroQuest Energy, L.L.C. Later, PetroQuest filed bankruptcy, and Sanare filed an adversary suit in that proceeding. Sanare argued that the lack of certain third-party consents rendered PetroQuest liable for costs associated with some “Assets” whose transfer the sale envisioned. The bankruptcy court and the district court each disagreed with Sanare.   The Fifth Circuit affirmed. The court explained that the Properties are “Assets” under the PSA, including section 11.1, even if the Bureau’s withheld consent prevented record title for the Properties from transferring to Sanare. This conclusion is plain from the PSA’s text, which excludes Customary Post-Closing Consents such as the Bureau’s from the category of consent failures that alter the parties’ bargain. Consent failures that do not produce a void-ab-initio transfer also do not alter the parties’ bargain, so the Agreements, too, are Assets under the PSA’s plain text. View "Sanare Energy v. Petroquest" on Justia Law

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In 2017, Plaintiff discovered a crude oil leak on its property. Despite 15 years of remediation efforts, the leak persists and the cause of the leak remains unknown. Plaintiff filed a claim with Defendant insurance company under a commercial general liability policy. However, the policy contains a "total pollution exclusion endorsement" which removes coverage for various events related to "pollution."Initially, the insurer agreed to cover Plaintiff's loses, but later denied the claim. In January 2017, Plaintiff filed this lawsuit in state court seeking: (1) coverage for past and future expenses it incurred in cleaning up the spill; (2) coverage for defense costs in connection with the Lawsuit; and (3) damages, penalties, and attorney fees. The insurer removed the case to federal court and the district court determined that the total pollution exclusion barred coverage.The Fifth Circuit affirmed, explaining "the absolute pollution exclusion in Liberty Mutual’s policy unambiguously excludes coverage ... related to 'clean up' or 'remov[al]' of the crude oil, as well as for any 'property damage’ which would not have occurred in whole or part but for the . . . release or escape” of the crude oil." View "Central Crude v. Liberty Mutual Ins" on Justia Law

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The Federal Energy Regulatory Commission (FERC)  brought an enforcement action against BP, alleging the company capitalized on the hurricane-induced chaos in commodities markets by devising a scheme to manipulate the market for natural gas. BP sought judicial review of FERC’s order finding that BP engaged in market manipulation and imposing a $20 million civil penalty.   The Fifth Circuit explained that because FERC predicated its penalty assessment on its erroneous position that it had jurisdiction over all (and not just some) of BP’s transactions, the court must remand for a reassessment of the penalty in the light of the court’s jurisdictional holding. Thus, the court granted in part and denied in part BP’s petition for review and remanded to the agency for reassessment of the penalty.   The court explained that it has rejected FERC’s expansive assertion that it has jurisdiction over any manipulative trade affecting the price of an NGA transaction. The court, however, reaffirmed the Commission’s authority over transactions directly involving natural gas in interstate commerce under the NGA. The court further determined that there was substantial evidence to support FERC’s finding that BP manipulated the market for natural gas. The court found that FERC’s reasoning in imposing a penalty was not arbitrary and capricious, though the court concluded that FERC’s reliance on an erroneous understanding of its own jurisdiction necessitates remand for recalculation of the penalty. Finally, the court held that neither separation of functions nor statute of limitations issues justify overturning the Commission’s order. View "BP America v. FERC" on Justia Law

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The Sabine–Neches Waterway is vitally important to the local, state, and federal economies. Despite its importance, sixty years have gone by without much effort to maintain or otherwise improve it. The Sabine–Neches Navigation District (District) set out to change that. Congress covered most of the cost with the District left to cover the rest. The District planned to cover its share through port fees. But the same federal law that led to congressional funding also sets limits on how costs can be passed onto consumers by local entities. Two energy companies sued the District, claiming that the port fees exceeded those limits. The district court concluded that they failed to state plausible claims and dismissed the case.   The Fifth Circuit affirmed. The court explained that the statute, properly construed, allows the District to finance its share of the project once a usable increment of the project is completed. Because Anchorage Basin No. 1 has been completed, subsection (a)(1) permitted the District to pass the Ordinance containing the User Fee. Further, Plaintiffs’ argument hinges on a strict reading of “necessary.” But context is needed to determine whether “necessary” means “absolute physical necessity” or merely “conducive to the end sought.” Under these circumstances, it is the latter. Thus, the District can cover more than 25% of the cost with the User Fee proceeds. View "BG Gulf Coast LNG v. Sabine-Neches" on Justia Law

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Loggerhead Holdings, Inc., a holding company that owned a scuba diving cruise business, was one of many plaintiffs who brought suit against an oil company because of the explosion of an offshore drilling rig and the resulting discharge of a massive quantity of oil into the Gulf of Mexico. Loggerhead’s claims were dismissed on summary judgment.   The Fifth Circuit affirmed in part and reversed in part. The court explained that Loggerhead had been able to continue operations for several years despite its fraught financial condition, and indeed despite reporting net losses on its taxes for the three years preceding the disastrous events of April 2010 in the Gulf. Whether it could have continued to survive, if not thrive, had the April events not occurred presents a fact question. Thus, the court concluded that a reasonable factfinder could find the requisite causal link between the Deepwater Horizon disaster and Loggerhead’s demise. Summary judgment should not have been granted.   However, because Loggerhead was not able to offer more than Dixon’s allegations and an unsupported estimate — evidence “so weak or tenuous on an essential fact that it could not support a judgment in favor of the nonmovant” — the district court properly granted BP’s motion for summary judgment on the Section 2702(b)(2)(B) claim. View "Loggerhead Holdings v. BP" on Justia Law

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Texas recently enacted such a ban on new entrants in a market with a more direct connection to interstate commerce than the drilling of oil wells: the building of transmission lines that are part of multistate electricity grids. The operator of one such multistate grid awarded Plaintiff NextEra Energy Capital Holdings, Inc. the right to build new transmission lines in an area of east Texas that is part of an interstate grid. But before NextEra obtained the necessary construction certificate from the Public Utilities Commission of Texas, the state enacted the law, SB 1938, that bars new entrants from building transmission lines. NextEra challenges the new law on dormant Commerce Clause grounds. It also argues that the law violates the Contracts Clause by upsetting its contractual expectation that it would be allowed to build the new lines   The Fifth Circuit concluded that the dormant Commerce Clause claims should proceed past the pleading stage. But the Contracts Clause claim fails as a matter of law under the modern, narrow reading of that provision. The court explained that limiting competition based on the existence or extent of a business’s local foothold is the protectionism that the Commerce Clause guards against. Thus, the court reversed the Rule 12(b)(6) dismissal of the claim that the very terms of SB 1938 discriminate against interstate commerce. Further, the court held that SB 1938 did not interfere with an existing contractual right of NextEra. NextEra did not have a concrete, vested right that the law could impair. It thus fails at the threshold question for proving a modern Contracts Clause violation. View "NextEra, et al v. D'Andrea, et al" on Justia Law

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Midship Pipeline Company, L.L.C. challenged part of a Federal Energy Regulatory Commission (FERC) order directing an administrative law judge to determine the “reasonable cost” for Midship to complete remediation activities at Sandy Creek Farms in Oklahoma.The Fifth Circuit disagreed with the FERC, finding that the matter was ripe for appeal. Further, the Fifth Circuit determined that the FERC order directing an administrative law judge to determine the “reasonable cost” of remediation activities was ultra vires because the FERC lacked authority under the Natural Gas Act (NGA) to do so. Thus, the court held that the FERC's action was ultra vires and vacated that portion of the Commission's order. The court remanded the remaining portion of the order to the FERC for further proceedings. View "Midship Pipeline v. FERC" on Justia Law