The Energy Law Blog : Energy Lawyer & Attorney : Liskow & Lewis Law Firm : Gulf Coast, Offshore

By Elisabeth Lorio Baer

Kivalina, Alaska, an Inupiat Eskimo village of 400 inhabitants perched on a barrier island north of the Arctic Circle, is bringing suit against two dozen fuel and utility companies, including ExxonMobil and Shell Oil, accusing them of helping to cause the climate change that it alleges is accelerating the island’s erosion. The village wants the companies to pay the costs of relocating to the mainland, which could amount to as much as $400 million.

The case is one of three major climate change lawsuits. In the other two cases, a Connecticut and a Mississippi case, the federal appeals courts reversed the district courts’ dismissal of the actions. With actions in three circuit courts, Supreme Court review may be on the horizon. President Obama’s senior advisor for energy and climate change, Carol M. Browner, however, urges that setting environmental standards is best left to the legislature.

Kivalina alleges in its Complaint that the industry conspired “to suppress the awareness of the link” between emissions and climate change through “front groups, fake citizen organizations and bogus scientific bodies.” These claims echo those alleged in the tobacco cases and could result in settlement negotiations, increased government regulation, and the eventual large recovery for plaintiffs.

For the full article, see http://www.nytimes.com/2010/01/27/business/energy-environment/27lawsuits.html?th&emc=th
 

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By Michael A. Mahone, Jr.

In U.S. Commodity Futures Trading Commission v. Dizona, the United States Court of Appeals for the Fifth Circuit recently considered allegations by the United States Commodity Futures Trading Commission that a natural gas trader had attempted to manipulate the price of natural gas by knowingly delivering false and inaccurate price and volume data to reporting services. These data gathering services would solicit bid data at the end of each month and would analyze this data to postulate an index price for natural gas, which would in turn set the price for the following month. Supposedly, the data reported to the reporting service was not based upon actual trades but was instead fabricated by the defendant to affect these indices, either positively or negatively. The Fifth Circuit ultimately agreed with the district court that there was insufficient evidence of price manipulation, once incriminating hearsay evidence was excised. Specifically, the Court explained that the Commission’s expert’s “general findings of biased reporting” and the vague incriminating statements made by the defendant on an audiotape (i.e., wherein he implicitly indicated that he would make sure to set the price at a particular level) were insufficient to show that the defendant delivered false reports in an attempt to manipulate the market price of natural gas. Yet, while the Commission was unable to prove its case in this instance, the theory advocated could very well be successful in the future, provided that better evidence is available.

http://caselaw.lp.findlaw.com/data2/circs/5th/0820418cv0p.pdf
 

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By Matthew Simone

On January 6, 2010, the Secretary of the Interior, Ken Salazar, announced plans to reform the nation’s policy on oil and gas development in an effort to shift from the Bush Administration’s “anywhere, anyhow” policy. The goals of this reform are to improve environmental protection and to reduce costly litigation and protests. Under the reformed policy, the Bureau of Land Management (BLM) will provide more detailed environmental review prior to leasing oil and natural gas resources. Secondly, the BLM will make forums available for public involvement in the development of Master Leasing and Development Plans prior to leasing areas where intensive new oil and gas development is anticipated. The new policy will also include a comprehensive parcel review process taking a site-specific approach to individual lease sales, which will include public participation, interdisciplinary review of available information, and visits to parcels when necessary to supplement or validate existing data. Lastly, Secretary Salazar’s reforms will provide guidance regarding the use of categorical exclusions (CXs) established by the Energy Policy Act of 2005 which allows the BLM to streamline the environmental review process for certain oil and gas exploration and development activities. The new policy will require more extensive environmental review on CXs when the BLM is presented with “extraordinary circumstances.” Secretary Salazar also created the Energy Reform Team which is charged with implementing the new policies and helping other agencies to coordinate and manage public energy resources in the future.

To read further, please go to http://7lmoganewsbits623.blogspot.com/

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By Stephen Wiegand

On December 15, 2009, EPA published in the Federal Register its final endangerment findings with respect to greenhouse gases. See 74 Fed. Reg. 66496 (Dec. 15, 2009) [http://www.epa.gov/climatechange/endangerment/downloads/Federal_Register-EPA-HQ-OAR-2009-0171-Dec.15-09.pdf]. This rulemaking is a response to Massachusetts v. EPA, 549 U.S. 497 (2007), in which the Supreme Court held that greenhouse gases were “pollutants” under the Clean Air Act and ordered EPA to determine whether greenhouse gases “may reasonably be anticipated to endanger public health or welfare” under Section 202 of the Act.
In its findings published on December 15, EPA concluded that six greenhouse gases taken in combination may reasonably be anticipated to endanger public health and public welfare. These gases include carbon dioxide, methane, nitrous oxide, hydroflourocarbons, perflourocarbons, and sulfur hexafluoride. In reaching these conclusions, EPA considered the extent to which elevated concentrations of greenhouse gases may cause changes in air quality, increases in temperature, changes in extreme weather events, increases in food- and water-borne pathogens, and changes in aeroallergens. EPA relied on assessments by the U.S. Global Climate Research Program, the Intergovernmental Panel on Climate Change, and the National Research Council.
While these findings do not in themselves impose any requirements on regulated entities, they are a prerequisite to future regulation of greenhouse gases under existing Clean Air Act authority. Many view the existing Clean Air Act as ill-suited to the regulation of greenhouse gases. This endangerment finding, along with EPA’s proposal to regulate greenhouse gases under existing Clean Air Act authority, see EPA Proposed PSD and Title V Greenhouse Gas Tailoring Rule [http://www.hss.energy.gov/nuclearsafety/env/rules/74/74fr55292.pdf], is being used as a forcing function to accelerate the passage of stand-alone greenhouse gas legislation by Congress.

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By Sarah Steward-Lindsey

In ERG Resources, LLC v. Merlon Texas, Inc., the First Court of Appeals in Houston held that oil which had been severed and stored in tanks on site was personal property and thus was transferred by an assignment of the oil and gas property on which the tanks were located. Merlon agreed to purchase oil and gas property owned by ERG pursuant to an “Assignment and Bill of Sale,” which stated that oil produced before January 1, 2008, and contained in the storage tanks on the land subject to the assignment “was the sole property of ERG.” After the assignment became effective, ERG submitted an invoice to Merlon for the value of the oil, which Merlon refused to pay. The court noted that the assignment expressly conveyed ERG’s “right, title, and interest in [the land], . . . inclusive, without limitation, the properties and/or oil and gas units located thereon, . . . together with . . . the personal property thereon, appurtenant thereto, or used or obtained in connection with said properties and/or oil and gas units.” (Emphasis by the court). The oil was personal property on the land as of the effective date of the assignment, and was thus conveyed to Merlon under the terms of the assignment.

To read the case, please go to http://www.1stcoa.courts.state.tx.us/opinions/PDFOpinion.asp?OpinionId=87174.
 

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By Matt Simone

In Broussard v. Hilcorp Energy Co., the Louisiana Supreme Court held that a plaintiff is not required, pursuant to Article 136 of the Louisiana Mineral Code, to provide a defendant with pre-suit written notice and an opportunity to perform prior to a judicial demand for property restoration related to oil and gas production contamination. Article 136 mandates these requirements for claims “arising from drainage of the property leased or from any other claim that the lessee has failed to develop and operate the property leased as a prudent operator….” The defendants argued that Article 136’s requirements should apply to any claim alleging that a lessee failed to act as a prudent operator. The court rejected the defendants’ position noting that the plain language of Article 136 is limited to claims regarding drainage of property or failure to develop and operate leased property. Since this case essentially involved a remediation/restoration claim, the court found that Article 136’s pre-suit requirements were inapplicable.

To read the case, go to http://www.lasc.org/news_releases/2009/2009-064.asp
 

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By April Rolen-Ogden

In Comer v. Murphy Oil, the Fifth Circuit left open the possibility that the oil and gas industry may be privately sued for alleged contributions to global warming. In this putative class action lawsuit, Plaintiffs claimed that the defendants’ operation of energy, fossil fuels, and chemical industries in the United States contributed to global warming. Plaintiffs further claimed that those contributions caused a rise in sea levels and added to the devastation wreaked by Hurricane Katrina, which destroyed Plaintiffs’ property and some public property. The Fifth Circuit concluded that Plaintiffs had standing for their nuisance, trespass and negligence claims, which were premised on the alleged causal link between global warming and Hurricane Katrina’s destruction of Plaintiffs’ property. The Fifth Circuit also held these claims were justiciable and thus ripe for determination by a court. Based on these findings, the Fifth Circuit reversed the District Court, which had dismissed Plaintiffs’ claims, and remanded for further proceedings.

To read further, please go to http://www.ca5.uscourts.gov/opinions/pub/07/07-60756-CV0.wpd.pdf
 

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The United States Supreme Court has denied the Petition for Certiorari filed by the United States Department of the Interior in Kerr-McGee Oil & Gas Corp. v. U.S. Dep't of the Interior, 554 F.3d 1082 (5th Cir. 2009). The high court's refusal to consider Interior's appeal allows the Fifth Circuit's January 2009 decision to stand.  

As explained in detail in the attached link (http://www.liskow.com/liskownewsletter/2009-01/newsletter.htm),  the Fifth Circuit held that the MMS had no authority to insert "price threshold" provisions into thousands of deep water Gulf of Mexico leases granted during the period 1996-2000.

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By Stephen Weigand

The Shreveport Times reports that federal authorities have added additional permit requirements for companies who pump water from the Red River for hydraulic fracturing of the Haynesville Shale. The requirements were added after the U.S. Fish and Wildlife Service raised concerns that the pumping process could be disturbing the habitat of three federally endangered and threatened Red River species. These species include the pallid sturgeon as well as a bird known as the interior least tern and a plant known as earth fruit. According to the Times, one of the new requirements is that a pump not be placed within 600 feet of an active least tern colony. This requirement effectively forces companies to survey the area before submitting a permit application. Additionally, the Times reports that the Fish and Wildlife Service is also requesting the use of smaller pipes and a diffuser to eliminate the possibility of sucking in fish during the pumping process.
 

For the full story, see http://www.shreveporttimes.com/article/20090921/NEWS01/909200332
 

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