Energy Legal Blog

The Federal Energy Regulatory Commission (“Commission”) issued on January 21, 2010 a Notice of Proposed Rulemaking (“NOPR”) in Docket No. RM09-16 that would permit a new class of transactions to proceed without the need for a Federal Power Act Section 203 order.  Comments on the proposal are solicited and will be due 60 days after its publication in the Federal Register.  (more…)

PR News announced that Bracewell & Giuliani’s Energy Legal Blog will be recognized as the best “Legal PR Blog” at its annual Corporate Social Responsibility & Legal Awards Luncheon on February 24, 2010 at the National Press Club in Washington, D.C. This award recognizes an outstanding and influential law-related weblog or online journal written by a representative of the organization with the goal of espousing the brand or a certain message and written with flair and personality.

“Managing a crisis and working with legal counsel are two areas of communication that will always be a part of a PR professional’s responsibilities,” notes Diane Schwartz, vice president of PR News. “The Legal PR Awards shines a light both on how law firms are communicating to their stakeholders and to how the PR industry is in the driver’s seat when a crisis hits.”

More information on the award program and this year’s winners is available at http://www.prnewsonline.com/awards/csr2009_event-finalists.html.

The so-called FRAC Act, legislation introduced in June of last year by Rep. Diana DeGette (D-CO) and Rep. Maurice Hinchey (D-NY) in the House of Representatives and Senators Casey (D-PA) and Shumer (D-NY) in the Senate, received a fresh jolt of publicity this week when the House Energy and Commerce Subcommittee on Energy and Environment convened a hearing on the recently announced merger between ExxonMobil and XTO Energy, Inc., one of the nation’s largest independent natural gas producers.  While nominally about the impact of the proposed merger on the natural gas market, the hearing, chaired by Rep. Ed Markey (D-MA), quickly focused in on hydraulic fracturing, the practice of injecting a high-pressure fluid mix of water, sand and a proprietary chemical mix into formations to release natural gas.  Hydraulic fracturing is specifically exempted from EPA regulation under the Safe Drinking Water Act.  The FRAC Act seeks to repeal this exemption and also to require operators to disclose the chemical constituents of the fracing fluid used at any given well. (more…)

Invoking its authority under Section 4a(a) of the Commodity Exchange Act of 1936 (CEA), on January 14, 2010, the Commodity Futures Trading Commission (CFTC) in a 4-1 vote issued a proposed rule to establish speculative position limits for certain energy contracts traded on CFTC reporting markets.  The proposed rule would establish aggregate and exchange-specific position limits to economically similar contracts that are traded on the New York Mercantile Exchange (NYMEX) and Intercontinental Exchange (ICE).  Affected contracts and commodities include:  Henry Hub Natural Gas, Light Sweet Crude Oil (WTI), New York Harbor No. 2 Heating Oil, and New York Harbor Gasoline Blendstock (RBOB).  The CFTC proposes to exempt from the position limits bona fide hedging transactions and certain swap dealer risk management transactions.  Comments on the proposed rule are due 90 days after the rule’s publication in the Federal Register, likely in mid- to late April. (more…)

In response to a request from EnergyConnect, Inc. — an aggregator of retail power customers — FERC in a January 19 order disclaimed Federal Power Act regulatory jurisdiction over retail aggregators that provide service only from demand response resources ” because they [deal only in] agreements to reduce demand, i.e., agreements not to purchase electric energy under certain circumstances, rather than agreements to sell electric energy at wholesale.” Previously FERC had asserted jurisdiction to regulate all aggregators as “public utilities” under the FPA because they hold wholesale contracts that involve the sale for resale of energy that would ordinarily be consumed by an end-use customer. Nevertheless, FERC held that EnergyConnect, Inc. was a “public utility”, with attendant market-based rate filing obligations, because, in addition to aggregating demand response, it was also engaged in sales of ancillary services, which “involve the injection of electric energy onto the grid and a sale for resale in wholesale electric markets.”

The January 19 order further clarifies that, although not required to obtain market-based rate authority, demand response providers remain subject to various other regulatory requirements including rules for doing business with regional transmission organizations, the prohibition against market manipulation, and market transparency rules.

The Supreme Court (8-1) in a January 13 decision confirmed that the “Mobile-Sierra presumption” that rates and terms of a wholesale power or natural gas contract are presumed to be just and reasonable applies as against all challenges and challengers, including non-parties to the contract, so long as the contract was freely negotiated at arm’s length.  In NRG Power Marketing, LLC v. Maine Pub. Utils. Comm’n (NRG), Justice Ginsburg writing for the majority reversed a 2008 DC Circuit ruling in Maine Pub. Utils. Comm’n v. FERC (Maine PUC) that the Mobile-Sierra presumption of lawfulness applied only to challenges from one of the parties to the contract and not to all other non-party challengers who, the lower court ruled, were entitled to a less-exacting standard of review.  Rejecting the DC Circuit’s holding as undermining the stability of contracts in energy markets, the Supreme Court’s NRG decision makes clear that the applicability of the Mobile-Sierra presumption to contract rates “does not depend on the identity of the complainant who seeks FERC investigation.”  NRG, slip op. at 10. (more…)