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Railroad industry leader sees jump ahead in volume of crude-by-rail. Are oil companies fully prepared for the potential liability issues and public relations problems that are expected to arise from another major accident on a train carrying crude oil? Matthew K. Rose, executive chairman of Burlington Northern Santa Fe, the second largest freight-carrying railroad in the US, said June 15 that as a result of a recent rebound in oil prices, the volume of oil transported by rail will increase in the coming months. As oil prices hit US$60 per barrel, he said, “we’ll see people uncapping wells and start to frack the next well. We think we’re in a much better place to handle that next surge.” Rose’s remarks come at a time when crude-by-rail is being targeted by environmentalists and government agencies on safety grounds. This year has seen four incidents of trains carrying crude oil derailing and spilling their cargo, and the US Department of Transportation predicts an average of 10 such accidents annually in the next two decades.
Texas city repeals anti-fracking ordinance after state law is passed. On June 17, the City of Denton, Texas, formally repealed its anti-fracking ordinance in light of a state statute prohibiting localities in that state from banning fracking activity within their borders. That repeal was an expected result of the passage of industry-supported HB40, commonly known as the Denton fracking bill. HB40 was said by its supporters to be a means of reasserting state control over the drilling process in Texas. The new law includes a four-part test for allowing cities to regulate drilling operations above ground – but it also provides that controls imposed by cities must be “economically reasonable” and cannot hinder the work of a “prudent operator.”
House passes bill to modify CFTC procedures and help farmers and utilities. The US House of Representatives on June 9 passed the Commodity End User Relief Act, a GOP-supported bill that would reauthorize the CFTC and would change the way derivatives are regulated. The bill, which passed by a vote of 246 to 171, would force the CFTC to perform a cost-benefit analysis when it writes rules, change the way in which the agency oversees the largest banks’ international trades and codify regulatory changes and customer-protection measures sought by farmers and others who use derivatives to protect their livelihood against fluctuations in commodity prices. According to House Agriculture Committee Chairman Mike Conaway (R-TX), the bill would “provide relief for the businesses that make things in our country,” including farmers, utilities, and manufacturers, but “would not roll back a single portion of the Dodd-Frank reform act.” The bill is opposed by the chairman of the CFTC and by many leading Democrats, and on June 2, the Obama Administration issued a veto threat.
FERC approves payment plan for utilities to encourage reliability in extreme weather. Aiming to avoid 2014’s plant shutdowns and price hikes, on June 10 FERC approved a proposal by PJM Interconnection LLC to increase the reliability of power plants. PJM runs the nation’s largest grid across 13 states from the mid-Atlantic to the Midwest. Under the “pay-for-performance” plan, generators that promise to have capacity available during peak-demand periods will get higher payouts than other plants and will, for the first time, be penalized for failing to meet those commitments. The grid will use the payments to encourage owners to make their units more resilient to extreme weather, allowing them to run when others are forced to shut down.
FERC enforcement office draws fire at House hearing. The enforcement arm of the Federal Energy Regulatory Commission came under fire at a congressional hearing June 3 and June 4, as some members of the US House of Representatives Energy and Commerce Committee suggested procedural changes that they said would make FERC enforcement proceedings fairer to defendants. These changes are included in a piece of legislation that is now pending. Some defense attorneys and congressional Republicans have expressed concern lately that defendants are being denied due process in these FERC proceedings, under which the agency is authorized to levy civil penalties, disgorgement and other measures against companies found to have engaged in fraud, market manipulation, anticompetitive conduct and similar activities. A key reform proposal in the bill would require the FERC enforcement office to disclose to the subject of an investigation “any exculpatory materials, potentially exculpatory materials, or materials helpful or potentially helpful to the defense” within a week of issuing preliminary findings.
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