Trailblazer Pipeline Company LLC Reinforces FERC Income Tax Allowance Policy But Punts Final Determinations on Other Partnership Taxation Matters

On February 21, 2019, the Federal Energy Regulatory Commission (FERC) issued Trailblazer Pipeline Company LLC (“Trailblazer”), FERC’s first order addressing how FERC applies its Revised Income Tax Allowance Policy Statement, as further revised on rehearing (collectively “Revised Policy Statement”), to a pipeline organized as a pass-through partnership that is not a master limited partnership (“MLP”) in a Natural Gas Act (“NGA”) section 4 rate case proceeding.  FERC issued the Revised Policy Statement in response to the U.S. Court of Appeals for the D.C. Circuit’s (“D.C. Circuit”) decision in United Airlines, Inc. v. FERC (“United Airlines”), which found that FERC could not permit a specific MLP pipeline to recover an income tax allowance in its rates without further explaining why this did not result in the MLP’s investors “double recovering” their income tax costs, based on a concern that the investors’ pre-tax return on equity (“ROE”) also provided such compensation when calculated using the discounted cash flow (“DCF”) methodology.  United Airlines did not consider other types of pass-through entities, such as non-publicly traded partnerships, or alternative methodologies to calculate ROE and the Revised Policy Statement did not address them directly. 

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DOE Deputy Secretary Attends German LNG Conference

On February 12, 2019, U.S. Deputy Secretary of Energy Dan Brouillette and U.S. Ambassador to Germany, Richard Grenell, participated in a German LNG Conference hosted in Berlin by German Federal Minister of Economic Affairs and Energy Peter Altmaier.  The group was joined by high-level government and industry leaders, including Executive Director of the International Energy Agency, Dr. Fatih Birol. 

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Sidley Environmental Trends

Topics discussed this week include:

  • Federal judicial interpretation of the Clean Water Act remains split
  • Federal court holds states violated Clean Water Act for dam decommissioning
  • Suit challenging President Trump’s 2-for-1 executive order survives motion to dismiss
  • Fiat Chrysler enters Clean Air Act consent decree
  • Audi engineers face mobile source “defeat device” criminal indictment
  • Federal court vacates New York regulator’s denial of water quality certificate for natural gas pipeline
  • Green New Deal nonbinding resolution proposed in Congress

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Save the Date: 2019 Spring Energy & Commodities Conference

Thursday, April 25, 2019
Sidley Austin | 1501 K Street N.W. | Washington, D.C. 20005
11:30 a.m. – 12:00 p.m. Registration
12:00 p.m. – 6:30 p.m. Lunch, Program and Networking Reception

Government shut-down, climate change, inverse condemnation, energy & commodity regulation and enforcement – 2019 looks to be a pretty tumultuous year with lots of change.

We will host an in-depth discussion on evolving regulatory, transactional and business issues facing U.S. and international energy and commodities market participants.

As our industry continues adapting to regulatory, credit, and market challenges, we will host notable industry leaders, distinguished government officials, and Sidley attorneys offering timely insights on pressing issues and trends.

This complimentary half-day program in Sidley’s Washington, D.C. office, will feature informative presentations and panel discussions followed by a networking reception.

For more information or questions, please contact dcevents@sidley.com.

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Energy Enforcement Update

In our first enforcement update for 2019, we cover a range of issues (including some news from the end of 2018):

  • FERC opens investigations into rates charged by three interstate natural gas companies;
  • Powhatan and Chen file opening appellate brief;
  • Judge suspends CFTC case against Kraft because of the partial government shutdown;
  • FERC increases maximum civil penalties for violations;
  • FERC approves settlement between FERC Enforcement and Algonquin;
  • Judge rules that FERC action against Silkman/CES is not time-barred by statute of limitations; and
  • Judge finds CFTC fails to meet burden on manipulation claims against DRW and Wilson.

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2019: Top Five Things to Watch in the FERC-Regulated Pipeline Space

1 – Make-up of FERC Commissioners – FERC’s leadership already was uncertain heading into 2019 before the tragic passing of Commissioner and former Chairman Kevin McIntyre on January 3, 2019. Prior to his passing, the Commission achieved a full complement of five commissioners in December 2018, following the confirmation of Bernard McNamee who filled a spot made vacant by the August 2018 resignation of former Commissioner Robert Powelson. Commissioner McNamee is facing calls to recuse himself from certain FERC electric generation proceedings given positions he took on grid resiliency in his prior position at the Department of Energy, and he is certain to be scrutinized by environmental groups for positions he is anticipated to take on pipeline matters as a FERC commissioner. 

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