March 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
NRC Does Not Believe NEPA Requires
a Terrorist Threat Review
Notwithstanding a recent U.S.
Court of Appeals decision (San Luis Obispo Mothers for Peace v. NRC, CCH
Nuclear Regulation Reporter, ¶20,669), NRC determined that the National
Environmental Policy Act (NEPA) does not require the Commission to consider,
as part of its license renewal review, the consequences of a hypothetical
terrorist attack on the Oyster Creek nuclear generating station. While
NRC is compelled to follow the Ninth Circuit decision—which requires
such a review—within the boundaries of that circuit, the Commission
is not obligated, in all of its proceedings, to adhere to the first court
of appeals decision to address a controversial question. Moreover, the
NRC position is consistent with the U.S. Supreme Court’ NEPA doctrine,
which holds that a reasonably close causal relationship between federal
agency action and environmental consequences is necessary to trigger a
NEPA study. There is simply no proximate link between the NRC license
renewal action and any altered risk of terrorist attack. (CCH
Nuclear Regulation Reporter, Amergen Energy Company, ¶31,530)
.
First Nuclear Plant Site in 30 Years
Approved by NRC
The first-ever Early Site Permit
(ESP), for the Exelon Generation Company’s Clinton, site, in central
Illinois, has been approved by NRC. The ESP is the first step in the new
licensing process for locating new nuclear plants in the United States.
The ESP process was established by NRC in 1989 for utilities to complete
the site and environmental evaluations before a decision is made to build
a nuclear plant. Once issued, an ESP is valid for 20 years and can be
used in conjunction with a subsequent combined Construction and Operating
License application. (CCH Nuclear Regulation Reports, Report No. 1364,
March 13, 2007)
DOE to Send Proposed Yucca Mountain
Legislation to Congress
The Department of Energy will
send Congress proposed legislation to improve the nation’s ability
to manage and dispose of commercial spent nuclear fuel and high-level
radioactive waste at the proposed Yucca Mountain, Nevada, geologic repository.
Among its various provisions, the proposed legislation would permanently
withdraw from public use the land at and surrounding the repository site
and improve Congress’ ability to provide adequate funding for the
project. It would also eliminate the current statutory 70,000 metric ton
cap on disposal capacity at Yucca Mountain in order to allow maximum use
of the mountain’s true technical capacity. (CCH Nuclear
Regulation Reports, Report No. 1364, March 13, 2007)
Electric Utilities
New Open-Access Transmission Policy
Will Reduce Discrimination
The Federal Energy Commission’s
open-access transmission policy has been revised by the agency to ensure
that transmission service is provided on a non-discriminatory and just
and reasonable basis, as well as to provide for more effective regulation
and transparency in the operation of the transmission grid. The final
rule is designed to (1) strengthen the pro forma open-access transmission
tariff, or OATT, to ensure that it achieves its original purpose of remedying
undue discrimination; (2) provide greater specificity to reduce the opportunities
for undue discrimination and facilitate the Commission’s enforcement
efforts; and (3) increase transparency in the rules applicable to planning
and use of the transmission system. The new policy has other goals as
well, according to FERC Chairman Joseph Kelliher, such as encouraging
competition in wholesale power markets and strengthening the power grid.
(CCH FERC Statutes and Regulations ¶31,241).
State Eminent Domain Power Remains
Intact under FERC Rule
The Federal Energy Regulatory
Commission (FERC) did not unlawfully commandeer states' eminent domain
authority in its Order No. 2003, Standardization of Generator Interconnection
Agreements and Procedures, in a provision that forbade transmission providers
from discriminating in their exercise of eminent domain powers to the
detriment of independent generators and to the advantage of affiliates,
the United States Court of Appeals for the District of Columbia Circuit
ruled. According to the court, FERC did nothing more than impose a non-discrimination
provision on public utilities. Moreover, the court said, the orders explicitly
left state law untouched, specifying that any exercise of eminent domain
by a public utility pursuant to the orders' non-discrimination mandate
be ``consistent with state law.'' Therefore, states remained completely
free to continue licensing public utilities to exercise eminent domain,
or to discontinue the practice. The provision was meant to broaden the
use of the state-provided authority for the benefit of independent generators
and their interconnection with transmission providers. The court also
held that FERC's Order No. 2003, which asserted jurisdiction over the
terms of interconnection between generators and transmission providers,
even where the transmission facility also engaged in local distribution,
for sales of electric energy for resale in interstate commerce, did not
represent an unlawful exercise of jurisdiction by FERC over dual-use facilities—i.e.,
those that engage in both transmission and local distribution—as
asserted by utility petitioners. (National Ass'n of Regulatory Util.
Commissioners, et al. v. FERC, DCCir., CCH Utilities Law
Reporter ¶14,630)
Energy Crisis Claims Barred on Preemption,
Filed Rate Grounds
Public entities and retail purchasers
of electricity could not proceed with California state law claims against
generators, sellers, and traders of electricity at wholesale arising out
of market conditions and events during the California energy crisis during
2000-2001, the California Court of Appeal, Fourth Appellate District,
held. Dismissal of the claims on preemption grounds was affirmed. Federal
preemption barred California Cartwright Act claims against the defendants
for allegedly combining to withhold supply from electricity markets and
colluding to fix electricity prices. The wholesale energy market was a
field regulated by the federal government through the Federal Power Act
(FPA) and placed within the exclusive authority of the Federal Energy
Regulatory Commission (FERC). The plaintiffs unsuccessfully attempted
to distinguish between the regulatory authority granted to FERC to order
compliance with its policies, such as by ordering refunds to electricity
consumers, and the types of damages and other relief recoverable under
the Cartwright Act. The plaintiffs' argument that state antitrust regulation
should have been allowed to fill the gaps left when FERC scaled back its
activities and abdicated its regulatory responsibilities was rejected.
Although the preemption ground alone was sufficient to uphold dismissal,
the court also ruled that the filed rate doctrine barred the Cartwright
Act claims. The allegations amounted to requests for penalties for alleged
anticompetitive conduct by defendants, and these potentially would interfere
with FERC supervision of market-based rates and any enforcement activities
allowed under FERC procedures, according to the court. (In re: Wholesale
Electricity Antitrust Cases I & II, Cal. Ct.App., CCH Utilities
Law Reporter ¶26,968)
Allocation of Reliability Cost Tracker
Charges Affirmed
The Commission affirmed an administrative
law judge's (ALJ) finding [115 FERC ¶63,044] that a power supply
agreement (PSA), entered into by Virginia Electric and Power Company (VEPCO)
and the United Illuminating Company (UI), a regional distribution utility,
allocated reliability cost tracker charges--which are fixed charges under
reliability must run (RMR) agreements--to an energy marketing company,
Dominion Energy Marketing, Inc. (DEMI), which had been assigned the PSA
by VEPCO in 2002. VEPCO and DEMI are subsidiaries of Dominion Resources,
Inc. (The United Illuminating Co. v. Dominion Energy Marketing, Inc.,
Opinion No. 493, 118 FERC ¶61,131)
Hydroelectric Power
Comment Sought on Permitting Process
for New Technologies
Public comment on how to process
preliminary permit applications for wave, current, and instream hydropower
technologies is being sought by the Federal Energy Regulatory Commission,
which is also looking for comments on how it should enforce permits once
they are issued. There is increasing interest in these new systems which
would utilize ocean waves, tides. and currents from free-flowing rivers.
These technologies have significant potential: it has been estimated that
the potential for wave and current power could be over 350 –terawatt
hours per year, which would more than double current hydropower production.
(CCH FERC Statutes and Regulations ¶35,555).
Natural Gas
Two LNG Terminals Authorized
Authorization was given to Bayou
Casotte Energy LLC (Bayou Casotte) to site, construct and operate a new
liquefied natural gas (LNG) terminal to be known as the Casotte Landing
LNG Project Natural Gas Import Terminal (Casotte Landing LNG Project)
in Jackson County, Mississippi. In a second order, Gulf LNG Energy, LLC
(Gulf LNG) was given authorization to site, construct and operate an LNG
terminal also in Jackson County, Mississippi. Gulf LNG Pipeline, LLC (GLP)
was also given approval to construct, own and operate an approximately
five-mile-long pipeline from the proposed LNG terminal to interconnections
with two interstate pipelines and a gas processing plant as part of the
LNG Clean Energy Project (Gulf LNG Energy, LLC, et al., 118 FERC ¶61,128
and Bayou Casotte Energy LLC 118 FERC ¶61,129).
Court: Zoning Ordinance Limiting LNG
Siting Preempted by NGA
A Baltimore, Maryland County
zoning amendment that provided for absolute prohibitions and limitations
on the siting of liquefied natural gas (LNG) importation facilities was
unenforceable because it was preempted under the Supremacy Clause of the
U.S. Constitution by the Natural Gas Act (NGA), as amended by the Energy
Policy Act of 2005 (EPAct 2005), the United States District Court for
the District of Maryland ruled. Although state and local governments have
a clearly defined role in providing input to the Federal Energy Regulatory
Commission (FERC) during the application process for the construction
of an LNG facility—including the consideration of local environmental
requirements and any public opposition—the U.S. Congress has given
FERC exclusive authority to ultimately determine the siting of an LNG
facility through the NGA, which controls natural gas distribution throughout
the U.S. A local government cannot exercise veto power over this nationwide
process by local zoning legislation, the court said. (AES Sparrows
Point LNG, LLC, et al. v. Smith, Jr., et al., DMd., CCH Utilities
Law Reporter ¶14,634)
Oil and Gas
BLM Revises Onshore Oil and Gas Order
No. 1
Onshore Oil and Gas Order Number
1, which covers approval of all proposed oil and gas exploration and development,
on all federal (and almost all Indian) onshore oil and gas leases, as
well as approvals necessary for subsequent well operations, has been revised
by the Bureau of Land Management. The existing Order dates back to October
1983. BLM states that it was necessary to revise the Order because of
changes made by the Federal Onshore Oil and Gas Leasing Reform Act of
1987 and two memorandums issued by the Department of the Interior in 1988,
as well as the need to eliminate delays in handling BLM Rights-of-Way
and Forest Service Special Use Authorizations. BLM also noted the many
changes to conditions, regulations, and policies since the Order was issued
in 1983. (CCH Energy Management ¶9524)
MMS Proposes Rewrite of Oil and Gas
Production Regulations
The Minerals Management Service
has proposed a complete rewrite of the oil and gas production regulations
in Part 250 that would eliminate most restrictions on production rates
and clarify the limits on flaring and venting natural gas. Flaring contributes
to carbon emissions, and venting contributes to methane emissions. Because
methane has a much more significant impact on the earth's atmosphere (about
23 times), the Government Accountability Office recommended a regulatory
change requiring flaring instead of venting and suggests that more data
on flaring and venting be collected. MMS asks for comment on whether it
should require operators to flare natural gas instead of venting it. (CCH
Energy Management ¶9309)