Energy Enforcement Update

Our first enforcement update for 2018 covers:

  • FERC terminates DOE NOPR proceeding on grid resilience and initiates new proceeding;
  • FERC increases maximum civil penalties for violations;
  • TOTAL files petition for writ of certiorari in Supreme Court;
  • FERC loses again – Judge rules Powhatan and Chen are entitled to a de novo trial in district court;
  • Judge denies Silkman and CES objection to magistrate’s discovery rulings in district court; and
  • ERCOT proposes rule revisions to protect its jurisdictional independence from FERC.

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U.S. Federal Energy Regulatory Commission Requires Interstate Natural Gas Pipelines to Recalculate Rates

On Jan. 12, the Federal Energy Regulatory Commission (FERC) issued data requests to four interstate pipelines that are proposing incremental recourse rates in pending Natural Gas Act (NGA) Section 7 certificate applications.1 This action was significant because it appears to be FERC’s first step toward responding to tax law changes in the Law to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018, also known as the Tax Cuts and Jobs Act of 2017 (2017 Tax Act).

FERC permits pipelines and public utilities to recover their actual or potential tax expenses in their regulated rates. The 2017 Tax Act reduces the corporate tax rate to 21 percent and allows certain investments to receive bonus depreciation treatment. FERC asked each pipeline to 1) explain how the 2017 Tax Act impacts its proposed project cost of service and the resulting initial recourse rate proposal; 2) provide an adjusted cost of service and recalculated initial incremental recourse rates; and 3) provide all supporting work papers and formulas.2

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Sidley Environmental Trends

Topics discussed this week include:

  • DOI proposes opening nearly all federal coastal waters to oil and gas drilling.
  • BLM rescinds 2015 Obama administration fracking rule.
  • EPA issues advance notice soliciting comment on Clean Power Plan substitutes.
  • EPA draft risk assessment concludes that glyphosate is not likely carcinogenic to humans.
  • Virginia DEQ publishes draft regulation to join RGGI.

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Incidental Take of Migratory Birds No Longer Prohibited by the Migratory Bird Treaty Act

On Dec. 22, 2017, the U.S. Department of the Interior (DOI) issued Memorandum M-370501, which concludes that the Migratory Bird Treaty Act (MBTA), 16 U.S.C. § 703, does not prohibit the incidental taking of migratory birds. DOI now reads the MBTA’s prohibitions on pursuing, hunting, taking, capturing, killing or attempting to do the same as applying only to affirmative actions that have as their purpose the taking or killing of migratory birds, their nests or their eggs. The opinion is significant because it reverses DOI’s prior interpretation of the MBTA as prohibiting incidental taking or killing of migratory birds. Because the MBTA is a strict liability criminal statute, meaning that a violation can occur regardless of whether the violator acted with intent, Memorandum M-37050 is also significant because it likely will reduce potential criminal exposure on project developers and operators.

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Energy-Related Provisions in the Final Tax Bill

On December 20, 2017, the United States Congress passed legislation known as the Tax Cuts and Jobs Act (the Tax Act), the first comprehensive reform of the U.S. tax code since 1986. The legislation is expected to be signed by President Trump and enacted into law. The changes will be effective for taxable years beginning after December 31, 2017, unless otherwise noted below.

The following summary analyzes certain aspects of the Tax Act likely to affect the energy industry, particularly publicly traded partnerships or master limited partnerships (MLPs).

For a complete list of Sidley resources summarizing the major changes to the U.S. tax code generally and with respect to particular industries and subject matters, as well as links to register for upcoming Sidley webinars on tax reform, please click here to access our Tax Reform Developments and Insights webpage.

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Energy Enforcement Update

This week’s enforcement update covers:

  • BP files motion seeking dismissal of FERC case based on statute of limitations;
  • Eversource sends cease & desist letter regarding alleged gas pipeline capacity withholding report;
  • Secretary Perry grants extension for FERC action on DOE grid resiliency proposal;
  • Kevin McIntyre sworn in as Chairman and Richard Glick sworn in as Commissioner at FERC;
  • House Energy and Commerce Subcommittee holds hearing on financial trading in electricity markets; and
  • CFTC releases annual enforcement results for Fiscal Year 2017.

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Sidley Environmental Trends

Topics discussed this week include:

  • EPA issues important New Source Review guidance.
  • EPA announces decision not to issue final regulations for hardrock mining.
  • EPA reaches Clean Air Act settlement with outdoor products manufacturer.
  • Commission issues rules that would ban hydraulic fracturing within Delaware River Basin.
  • Federal court upholds lower court ruling that North Dakota lacks standing to intervene to challenge EPA settlement.
  • California Supreme Court decides that groundwater charges are neither taxes nor tied to property ownership.

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