Energy Update September 2006

September 2006

From the editors of Wolters Kluwer Law & Business, this update describes important developments from CCH energy publications.

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Nuclear Power

Domenici: Repository Site Will Not Meet Spent Fuel Obligations
The proposed nuclear waste repository at Yucca Mountain, Nevada, will not be sufficient to meet the government’s spent fuel obligations and additional solutions will be needed for the safe storage of the remaining spent fuel, Senate Energy and and Natural Resources Committee Chairman Pete Domenici (R.-N.M.) said August 3. A practical interim solution is needed, the Chairman said, because even if the repository opened on time, large amounts of spent fuel would remain in storage at reactor sites for decades. Domenici also expressed concern about the uncertain Yucca schedule. While he was pleased with the Department of Energy’s new timeline, Domenici said he is concerned that it doesn’t allow any margin for further delays or establish a timeframe for moving all commercial fuel to the repository. (CCH Nuclear Regulation Reporter, No. 1350, August 8, 2006)

NRC: New Reactors Proposed/Reactor License Renewals Up
NRC Chairman Dale Klein recently reported to Congress that the nuclear industry is showing increased interest in the construction of new reactors. The agency expects to receive a significant number of combined license applications for new reactors over the next few years. To date, potential applicants have provided NRC with letters of intent seeking a total of 19 site-specific combined licenses for the construction of up to 27 new nuclear units. At the same time, Klein reported that the Commission has already renewed the operating licenses of 44 of the 104 reactors in the United States. (CCH Nuclear Regulation Reporter, No. 1352, September 5, 2006)

Electricity

Mediation Talks Open in 2000-01 Energy Crisis Disputes
FERC Chairman Joseph T. Kelliher pledged “full support of the Commission” in the settlement of lingering disputes arising from the 2000-2001 energy crisis in California and other Western states. The settlement conference was the result of an August 2, 2006 directive from a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit. More than 200 appeals of Commission actions related to the California and Western energy crisis are pending before the Ninth Circuit. The Chairman noted that nearly two dozen other appeals are pending before the U.S. Court of Appeals for the D.C. Circuit. FERC related settlements have produced more than $6 billion for consumers, Chairman Kelliher said (FERC News Release, No. 06-54, September 6, 2006).

NERC Certified as Electric Reliability Organization
The North American Electric Reliability Corporation (NERC) has been certified by the Federal Energy Regulatory Commission nation’s Electric Reliability Organization, in accordance with the Energy Policy Act of 2005. The Commission also accepted, with some modifications and clarifications, NERC’s proposed governance structure, funding, reliability standards development process, enforcement program, and pro forma Regional Entity delegation agreement. As the ERO, NERC will be responsible for developing and enforcing mandatory electric reliability standards under the Commission’s oversight. The standards will apply to all users, owners, and operators in the bulk power system. The specific conditions, revisions, and clarifications, spelled out in the ERO certification order will require NERC to make a compliance filing. (CCH FERC Statutes and Regulations, No. 472, August 21, 2006)

FERC Addresses CAISO Refund Calculation Issues
Outstanding disputes filed by market participants in response to an earlier Commission order’s [112 FERC ¶61,176] December 1, 2005 deadline for parties to file disputes with the California Independent System Operator Corporation’s (CAISO), the California Power Exchange “(Cal PX), and/or the Automated Power Exchange” (APX) refund calculation processes and refund offsets, including fuel cost allowance (FCA) claims, cost-and-revenue study offsets, and emissions cost offsets were addressed by the Commission. The Commission also provided further guidance on outstanding concerns with regard to refund calculation and allocation processes (San Diego Gas & Electric Co. v. Sellers of Energy and Ancillary Services into Markets Operated by the California Independent System Operator and California Power Exchange, et al., 116 FERC ¶61,167).

Long-Term Transmission Rights Guidelines Established
Guidelines to be followed by independent transmission organizations in developing proposals to provide long-term firm transmission rights in organized electricity markets have been established by the Federal Energy Regulatory Commission. These guidelines, which took effect August 31, will increase long-term transmission price certainty in these markets and allow for new investments and other long-term power supply arrangements, the Commission said. The final rule requires independent transmission organizations, such as Regional Transmission Organizations and Independent System Operators that oversee electricity markets, to make long-term transmission rights available to all transmission customers. To achieve this goal, the Commission adopted seven guidelines. (FERC Statutes and Regulations, ¶31, 226). (CCH FERC Statutes and Regulations, No. 472, August 21, 2006)

Oil and Gas

BLM Plans to Establish Oil Shale Program
The Bureau of Land Management is planning a rulemaking proceeding to establish a commercial leasing program for oil shale. Oil can be extracted from certain organic-rich rocks using a distillation process. An area of about 16,000 square miles within Wyoming, Colorado, and Utah has been identified as the largest known concentration of oil shale in the world. Major energy legislation signed into law last year (the Energy Policy Act of 2005) required the Department of the Interior to begin to establish a program to encourage the development of these resources. BLM is currently seeking comments from interested persons on how to begin. (CCH Energy Management ¶9308).

MMS Continues Work on 5-Year Oil and Gas Leasing Plan
The Minerals Management Service has asked for comments on its second draft of its Proposed 5-Year Outer Continental Shelf Oil and Gas Leasing Program for 2007—2012. MMS’s 5-Year program identifies the areas to be offered for leasing during that five-year period, and establishes a schedule for sales. The process of developing a five-year program takes about two to three years. The prices for both oil and natural gas have increased considerably since the present five-year program began in 2002. MMS noted that that the Outer Continental Shelf produces 30 percent of all domestic oil production and 23 percent of all domestic gas production. The current program expires June 30, 2007. After considering all timely-received comments, MMS will present a proposed final draft to the Congress and the President for approval. (CCH Energy Management ¶9782).