DLA Piper Energy Report: U.S. Supreme Court Hears Arguments On FERC Rule

This regular publication by DLA Piper lawyers focuses on helping clients navigate the ever-changing business, legal and regulatory landscape.

Supreme Court hears “demand-response” arguments on FERC rule. On October 14, the US Supreme Court heard oral arguments on FERC’s “demand-response” rule, which requires that regional electricity providers give financial incentives to customers who cut back power use in periods of high energy demand. In one of the most important energy arguments at the Court in recent years, Republican-appointed justices questioned FERC’s authority to promulgate the rule. Chief Justice John Roberts said he is concerned about the federal government exercising too much authority over retail electricity markets, traditionally the province of state regulators. “You have to have some sort of limiting principle, otherwise FERC can do whatever it wants,” Roberts said. After the argument, there was considerable speculation that the Court would uphold a lower-court decision to strike down the regulation. The demand-response rule aims to improve grid reliability, lower costs and encourage clean energy. The federal government has used the demand-response rule for years; in 2011, however, FERC proposed new compensation rules. It is those rules that triggered this litigation.

Key senator proposes new way to secure end of oil-export ban. On October 15, a key Republican senator put forth a possible way to persuade Senate Democrats to support pending legislation that seeks to end the nation’s ban on crude oil exports. This measure has already passed the US House of Representatives. Senator John Hoeven (R-ND) said he was considering the idea of pairing the oil export ban with another, Democrat-backed legislative package: reauthorization and full funding of the Land and Water Conservation Fund. Senator Hoeven hopes that by combining the two bills, he can pick up the support of Democrats such as Senator Maria Cantwell (D-WA). President Barack Obama has threatened to veto the oil-export bill. It is unclear what effect combining the two measures would have on the White House’s thinking.

Clinton expresses opposition to Keystone XL pipeline. Speaking in the Democratic presidential debate on October 13, front-running candidate Hillary Rodham Clinton said she opposes the Keystone XL pipeline. The controversial pipeline would move heavy crude oil from Western Canada to the US Gulf Coast, where some would be refined and some would be directly shipped abroad. The project has long been on hold pending a review by President Obama and the State Department. The administration must first determine if the pipeline “serves the national interest” because it crosses an international border. Many environmental groups oppose the pipeline, citing the risk of oil spills and the higher greenhouse gas emissions from the extraction of oil sands compared with the extraction of conventional oil. Clinton’s position on the pipeline had been unclear until the debate. A nationwide Harris poll conducted in September for the American Petroleum Institute found that a majority of US voters across the political spectrum agreed that the years of Keystone XL delay have hurt US energy security and economy. The poll found that 68 percent of Americans support building the pipeline and 66 percent say they are more likely to support a candidate who supports approving Keystone.

Pro-Keystone XL: Canada’s new prime minister. Justin Trudeau, prime minister-elect of Canada, is a supporter of the Keystone XL pipeline, numerous media outlets are reporting on October 20. The Guardian noted that this position “puts him at odds with Barack Obama.” Newsweek added that Trudeau also appears to support the proposed Energy East pipeline, which would carry tar sands crude east from Alberta to ports in New Brunswick for shipment worldwide. Prime Minister Stephen Harper, the Conservative whom Trudeau defeated on October 19, also supports Keystone XL and Energy East.

Federal Clean Power Plan to be challenged in courts and on Capitol Hill. On August 3, the Obama Administration and the EPA unveiled the Clean Power Plan, a policy designed to combat anthropogenic climate change by reducing carbon dioxide emissions from fossil fuel-fired electric generating units. The CPP calls for existing power plants to reduce their CO2 emissions by 32 percent from 2005 levels by 2030. The CPP provides states with flexibility in proposing different types of plans – rate-based or mass-based – to achieve the mandated CO2 emissions reductions. Opponents of the CPP – including several states and coal and utility industry groups – have already filed two actions to stay the rule before it was even published in the Federal Register, both of which were rejected by the DC Circuit as premature. Opponents of the CPP are now awaiting the final rule’s publication in the Federal Register so that their challenges can move forward. At a hearing in September, Senate Environment and Public Works Chairman Jim Inhofe (R-OK) questioned whether EPA was intentionally delaying finalization of the CPP because of the UN climate talks in Paris in December. “Are you aware that delaying publication until the end of October interferes with the ability of Congress and the public to challenge the [CPP] before the big show in Paris?” Inhofe asked.

For more information about these developments and their effect on your business, please contact your DLA Piper Relationship Partner or:

Joseph Tato
Global Co-Chair, Energy Sector
+1 212 335 4975

Robert Gruendel
Global Co-Chair, Energy Sector
+1 212 335 4736

Robert Alessi
Global Vice Chair, Energy Sector
+1 212 335 4866


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