June 2007
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
Nuclear Power
Bush Praises Environmental Benefits
of Nuclear Power
President Bush praised the environmental benefits of nuclear power June
21, saying that while there is ``no single solution to climate change
. . . there can be no solution without nuclear power.’’ Speaking
at Browns Ferry Nuclear Plant in Athens, Alabama, Bush said that without
nuclear power in the U.S. there would be nearly 700 million additional
tons of carbon dioxide in the atmosphere every year. The President noted
that to keep pace with nuclear energy needs, experts believe it will be
necessary to build an average of three new plants a year starting in 2015.
To expedite this program, the Nuclear Regulatory Commission is implementing
a more efficient review process that allows builders to complete several
steps at a time without compromising safety, Bush said. NRC now expects
20 applications for combined construction and operating licenses for up
to 30 new reactors. (By Sarah Borchersen-Keto, CCH News Bureau Staff Writer,
CCH Nuclear Regulation Reporter, No. 1371, June 26, 2007)
Higher NRC Inspection and Licensing
Fee Approved for 2007
A higher combined licensing and inspection fee for applicants and licensees
has been approved by the Nuclear Regulatory Commission for 2007. With
regard to annual fees, however, the agency has reduced fees for the majority
of its classes of licenses. The total amount to be recovered for fiscal
year 2007--$670.5 million—is approximately $45 million more than
last year. The two professional hourly rates previously charged by the
agency for licensing and inspection services have been replaced with one
hourly rate of $258 for activities both in the nuclear reactor safety
program and the nuclear materials and waste safety program. This represents
an increase from the 2006 hourly rates of $217 for the reactor program
and $214 for the materials program. With regard to annual fees, most power
reactor licensees will have to pay $4,043,000 for 2007, up from last year’s
$3,704,000. High-enriched uranium fuel facility licensees, however, will
be assessed $4,096,000 instead of last year’s total of $5,420,000.
The new fees will take effect August 6, and will be reflected in full
text at that time. (CCH Nuclear Regulation Reporter, No. 1370, June 12,
2007)
NRC’s Definition of Byproduct
Material Expanded
Implementing provisions of the Energy Policy Act of 2005, the Nuclear
Regulatory Commission has expanded the definition of radioactive byproduct
material subject to its regulatory authority. The Energy Policy Act of
2005 expanded the definition of byproduct material subject to NRC’s
authority to include discrete sources of uranium-226, material made radioactive
in a particle accelerator, and other radioactive material that the Commission
determined could pose a threat to public health and safety or the common
defense and security. Previously, these materials were regulated by the
states. The final rule will be published in the Federal Register later
this year. (CCH Nuclear Regulation Reporter, No. 1369, May 22, 2007)
Oil & Gas
Additional Royalty Relief for Deep
Wells in Gulf Proposed
Additional royalty relief for deep and ultra-deep gas wells on the Outer
Continental Shelf in the Gulf of Mexico has been proposed by the Minerals
Management Service. The proposal is intended to implement changes enacted
by the Energy Policy Act of 2005 (EPAct 2005). The new royalty relief
would supplement existing royalty relief for OCS leases in the Gulf of
Mexico. The royalty suspension volume for ultra-deep wells at least 20,000
feet true vertical depth subsea (TVD SS) in less than 400 meters of water
would be raised to 35 billion cubic feet (BCF). The current rules provide
15 BCF of relief for wells between 15,000 and 18,000 feet deep, and 25
BCF for wells at least 18,000 feet deep. These additional relief provisions
would apply only when the average daily closing gas price on the NYMEX
is at or below $4.47 per MMBtu, in inflation-adjusted 2006 dollars. In
addition, in accordance with EPAct 2005, the royalty provisions that are
eventually adopted will be effective retroactive to the date the proposed
rule was issued, which was May 18, 2007. DOI's discretionary authority
to grant royalty relief to leases offshore of Alaska prior to the commencement
of production would be extended under the proposal. However, neither existing
deep well gas royalty relief nor the newly-proposed provisions would apply
to leases offshore of Alaska. (CCH Energy Management ¶9311)
BLM Proposes to Amend Alaska National
Petroleum Reserve Rules
Changes to oil and gas administrative procedures for the National Petroleum
Reserve-Alaska have been proposed by the Bureau of Land Management. The
proposal is intended to implement the amendments to the Naval Petroleum
Reserves Production Act of 1976 that were changed by the Energy Policy
Act of 2005. Under the proposal, BLM would be able to waive, suspend,
or reduce the rental, royalty, or minimum royalty on leases in the NPR-Alaska
if necessary to promote development or BLM determined the lease could
not be successfully operated under the lease terms. The provision is intended
to keep open producible wells that would otherwise be shut in. BLM would
be required to consult with the State of Alaska and the North Slope Borough
within 10 days of receiving an application to waive, suspend, or reduce
the rental, royalty, or minimum royalty. BLM would be allowed to require
additional bonding for any NPR-Alaska lease if BLM determined that the
operator posed a risk. The conditions under which BLM is required to extend
lease terms would be expanded to include situations when BLM has determined
that oil or gas is capable of being produced in paying quantities from
the lease. NPR-Alaska leases would expire on the 30th anniversary of their
original issue date unless oil or gas is being produced from the lease,
up from ten years. Leases on which there has been a discovery of hydrocarbons
would have different ten-year renewal criteria than leases without a discovery,
which would allow lessees to explore and develop a lease when there is
insufficient time to meet conditions for lease extensions without having
to compete for the lease again in a subsequent lease sale. Other provisions
of the proposal address tract transfers, lease consolidations, consultation
on lands owned by the ASRC or the State of Alaska, unit agreements, and
the definition and functions of participating areas. (CCH Energy Management
¶9312)
Electric Utilities
Midwest ISO and PJM LTTRs Orders Approved
Two orders on long-term transmission rights (LTTRs) in two broad regions
that the Commission stated would help set the stage for planning and expansion
of the transmission grid were approved by the Commission. Tariff revisions
submitted by the Midwest Independent Transmission System Operator, Inc.
(Midwest ISO) providing for LTTRs, in compliance with Order No. 681 [CCH
Federal Energy Regulatory Commission Reports, Statutes and Regulations
Edition, ¶31,226] were accepted by the Commission, subject to modification.
The Commission also accepted revisions to the rules for allocating short-term
transmission rights, subject to modification (Midwest Independent Transmission
System Operator, Inc. 119 FERC ¶61,143; PJM Interconnection, L.L.C.
119 FERC ¶61,144).
NERC’s Assignment of Violation
Risk Factors Approved
Over 700 violation risk factors proposed by the North American Electric
Reliability Corporation (NERC) were approved by the Commission. NERC is
the certified Electric Reliability Organization (ERO) responsible for
developing and enforcing mandatory reliability standards. NERC plans to
assign a low, medium, or high violation risk factor to each requirement
of each mandatory reliability standard to associate a violation of the
requirement with its potential impact on the reliability of the bulk-power
system (North American Electric Reliability Corp,. 119 FERC ¶61,145).
QF Exemption Removed from Reliability
Standards
The exemptions available to qualifying facilities (QFs) from the electric
reliability provisions of the Federal Power Act have been eliminated by
the Federal Energy Regulatory Commission (FERC). According to the Commission,
from a reliability perspective, there is no meaningful distinction between
QF and non-QF generators that would warrant exemption of QFs from the
mandatory reliability standards. FERC states that QF generators affect
the reliability of the Bulk Power System as much as non-QF generators
and notes that while many of the QFs are small facilities, others are
quite large and it sees no justification for large facilities to be exempt
from the new standards. Small QFs will remain exempt because the reliability
standards do not apply to them. (CCH Federal Energy Regulatory Commission
Reports--Statutes and Regulations Edition ¶31,248).
FERC's Resolution of Tariff Issue Upheld
in Federal Court
The Federal Energy Regulatory Commission's (FERC) reading of a regional
transmission organization's (RTO) tariff that the tariff was ambiguous
regarding the circumstances under which the RTO was permitted to repeat
its interconnection studies, which could change the amount an interconnecting
firm must pay for interconnection, was reasonable, the U.S. Court of Appeals
for the District of Columbia ruled. FERC's findings that unlimited restudy
would be unreasonable and that a better reading of the tariff would permit
restudy in only a limited set of circumstances required deference, according
to the court. Public Service Electric and Gas Co. v. FERC, DC
Cir., CCH Utilities Law Reporter ¶14,642)
Issue of Proper Basis for FERC's Jurisdiction
Remanded to FERC
The Federal Energy Regulatory Commission's (FERC) reasons for failing
to provide an adequate basis for its rejection of the Connecticut Department
of Public Utility Control's (DPUC) challenge to FERC's statutory jurisdiction
to regulate generation resource adequacy in a matter relating to ISO New
England, Inc. (ISO-NE), which administers New England's electricity grid,
were themselves rejected by the U.S. Court of Appeals for the District
of Columbia Circuit. Before the court, FERC had abandoned its reliance
on the ISO-NE tariff and a “participants agreement” between
utilities in the region that it had used in its initial rejection of DPUC's
challenge. Instead, FERC contended that FPA Section 201, Regulation of
Electric Utility Companies Engaged in Interstate Commerce, permitted FERC
to regulate generation resource adequacy because of its effect on interstate
electricity transmission. FERC offered four arguments for the court to
overlook FERC's failure to set forth in either of its orders its reliance
on Section 201 of the FPA, but the court of appeals rejected all of these
arguments and remanded the matter to FERC for further proceedings. (Connecticut
Dep't of Public Utility Control v. FERC, DC Cir., CCH Utilities Law
Reporter ¶14,644)
Cooperative's Reintegration Plan, Costs
Approved
A lower court did not clearly err by holding that the City of Cookeville,
Tennessee must pay reintegration costs of $5.285 million to Upper Cumberland
Electric Membership Corporation (cooperative) as an element of the compensation
that the city had to pay the cooperative for the city's annexation of
nine areas in which the cooperative provided electric services, the U.S.
Court of Appeals for the Sixth Circuit held. Tennessee law required that
when a city annexes a territory and exercises its right to purchase electric
utility property within the annexed territory, the city must either grant
the electric cooperative that was providing electric services to customers
a franchise to serve the annexed area, or offer to purchase any electric
distribution properties and service rights within the annexed area owned
by the cooperative. The city chose the latter, and the statute provided
a formula for determining the amount of compensation. (City of Cookeville,
Tennessee v. Upper Cumberland Electric Membership Corp., et al.,
6th Cir., CCH Utilities Law Reporter ¶14,643)