Recently in appellate litigation Category

Latest Round in PURPA Wars: Fifth Circuit Upholds Texas Rule Limiting PURPA Rights of Wind Generators

September 11, 2014

Earlier this week, the United States Court of Appeals for the Fifth Circuit issued the latest salvo in the PURPA wind wars, this time handing wind producers a painful defeat. The Fifth Circuit's opinion upholds a rule issued by the Public Utility Commission of Texas ("PUCT") preventing non-firm resources from forming Legally Enforceable Obligations under PURPA. If the Fifth Circuit opinion stands, it could limit the ability of wind producers to obtain access to electricity markets under PURPA (the Public Utility Regulatory Policies Act), a 1978 law aimed at allowing small independent and renewable energy producers (referred to as "Qualifying Facilities" or "QFs") access to electricity markets controlled by regulated utility monopolies.

The Fifth Circuit opinion, however, may not be the final word. The Fifth Circuit's opinion is at odds with the Federal Energy Regulatory Commission's ("FERC") 2009 declaratory order in the same dispute, which found the PUCT rule to be contrary to FERC regulations requiring that "[e]ach qualifying facility shall have" the option to sell energy under a "legally enforceable obligation." In addition, a lengthy dissenting opinion issued by Judge Edward C. Prado suggests that the majority's reasoning may be vulnerable, both in its primary conclusion and in supporting conclusions related to the degree of deference owed to FERC's interpretation of PURPA and federal regulations.

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U.S. Appeals Court Concludes FERC Lacks Authority to Fine Federal Entities for Reliability Violations

August 22, 2014

In a ruling that could have far-reaching implications for the electric reliability here in the Pacific Northwest, the U.S. Court of Appeals for the District of Columbia Circuit today found that the Federal Power Act does not authorize the Southwest Power Administration ("SWPA") to pay fines for admitted violations of mandatory electric reliability standards.

The decision turns on the doctrine of sovereign immunity. In its modern form, the doctrine bars federal government liability unless Congress provides a clearly-expressed statutory waiver of sovereign immunity. Today's decision applies this doctrine to Section 215 of the Federal Power Act, the provision Congress added to the Act in 2005 to create a system of mandatory electric reliability standards. Section 215 authorizes the Federal Energy Regulatory Commission ("FERC") to impose fines on "users, owners and operators" of the Bulk Electric System if they violate electric reliability standards developed by the North American Electric Reliability Corporation ("NERC"). Carefully parsing the language of Section 215, today's decision finds no clear expression of Congressional intent to allow federal entities such as SWPA to pay fines for violations of reliability standards.

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Regulating Emergency Generators: EPA Denies Rehearing of RICE Rule, Appeals Court is Next Stop

August 20, 2014

On August 15, the U.S. Environmental Protection Agency ("EPA") issued a notice denying petitions for rehearing of its new rules governing air emissions from stationary Reciprocating Internal Combustion Engines ("RICE"). RICE, especially diesel engines, are widely used for emergency backup generation for hospitals, factories, and other facilities requiring an uninterrupted supply of power. They are also an important source of power to stabilize the electric grid in certain types of emergencies. Developments concerning the RICE emissions rule are therefore of great concern to electric utilities and a multitude of end-use electric consumers who rely on diesel back-up generators.

The rehearing petitions stem from EPA's 2010 proposal to extend its regulation of hazardous air pollutants emitted by stationary RICE from the previous 500 horsepower limit down to engines as small as 100 HP. As we reported early last year, in response to concerns related to the mismatch between the proposed RICE rule and NERC reliability standards, EPA modified the proposed rules to allow generators that have not been retrofitted with expensive pollution control equipment to operate for up to 100 hours per year during declared electrical emergencies, and for such generators to operate for up to 50 hours per year to prevent voltage collapse or overloads in local transmission or distribution systems.

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Milestone in Transmission Regulation: U.S. Court of Appeals Upholds Order No. 1000

August 18, 2014

On Friday, the U.S. Court of Appeals for the District of Columbia Circuit rejected a host of challenges to the Federal Energy Regulatory Commission's ("FERC") Order No. 1000, upholding the order in its entirety. As we've previously discussed, Order No. 1000 aims to create a level regulatory playing field for independent transmission developers, thus encouraging new sources of badly-needed investment in the nation's transmission infrastructure. The D.C. Circuit's 97-page opinion upholding the order represents an important milestone in the evolution of regulation in the electric industry.

Order No. 1000 changed the planning and cost allocation regime for interstate transmission projects in three major requirements:

(1) Each FERC-jurisdictional transmission provider must participate in a regional transmission planning process that identifies the most cost-effective regional and inter-regional transmission projects, and provides for a method of cost-allocation for the selected projects meeting six specific principles. Independent transmission developers and other non-incumbents need not participate in this process, but it must be open to their participation.

(2) The planning process must provide for transmission expansion driven by public policy requirements, along with economic and reliability needs. State renewable portfolio standards and other public policies favoring the development of renewable energy are the largest public policy factor driving the need for new transmission.

(3) The federal "right of first refusal" ("ROFR") must be removed from FERC-approved transmission tariffs. The ROFR allows incumbent utilities to construct transmission projects proposed by other entities within the incumbents' service territories. FERC views this as a major barrier to entry for independent transmission developers, whose investment in planning and permitting is essentially wiped out if the incumbent exercises its ROFR. Although not common in the Northwest, the ROFR requirement proved extremely controversial in other parts of the country.

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Iowa Supreme Court Clears Regulatory Path for Rooftop Solar Providers, Concluding They Are Not Regulated "Public Utilities"

July 16, 2014

Last week, in a decision that is likely to have far-reaching consequences both for the solar power industry and for traditional utilities, the Iowa Supreme Court found that a solar rooftop leasing company is not a "public utility" subject to regulation by the Iowa Utilities Board. The Iowa Court is the first to address whether a company leasing solar panels on a customer's rooftop is a regulated "public utility" under state utility laws. If followed in other states, the court's conclusion will greatly reduce the regulatory burdens faced by sellers of solar rooftop systems, especially those using innovative leasing/PPA arrangements, while intensifying pressure on traditional utilities from the growing market for customer-owned solar power. (SZ Enterprises, LLC d/b/a Eagle Point Solar v. Iowa Utilities Board, No. 13-0642 (Iowa Sup. Ct., issued July 11, 2014).

As noted previously, the Washington Utilities and Transportation Commission ("UTC") last year cleared some regulatory roadblocks for third-party owners of distributed generation systems such as rooftop solar generators. However, it reserved the question whether such third-party owners are "public service companies" subject to UTC regulation, and has yet to issue an guidance on that question. The Iowa court's conclusion therefore may hold particular sway in this state.

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Decoupling: Washington Muddles Toward a New Utility Model

July 15, 2014

Several trends have converged in recent years to put traditionally-structured utilities under increasing stress. First, the growth rate of electricity consumption in the United States has steadily declined over the last several decades, to the point that the Energy Information Administration ("EIA") recently projected consumption in the future will grow at less than one percent annually. Second, limits on greenhouse gas emissions and other environmental regulations place increasing economic pressure on traditional central-station generation, especially coal-fired plants. Third, economic trends, including steady declines in prices for equipment and state policies favoring renewable generation, make distributed generation and other alternatives to power from traditional utilities increasingly attractive, especially in high-cost states.

Because traditional utility rates are based on the amount of energy sold (e.g., cents per kWh of electricity sold to the end-use consumer), these trends put utilities in a difficult position. Utilities must finance huge infrastructure investments, including the transformation of the nation's generation fleet, especially aging coal-fired plants, to a low-carbon future and major updates and expansions of the nation's electric transmission system. At the same time, demand for their products is likely to be essentially stagnant, and they face increasing competitive pressure from non-utility alternatives. As a result, predictions of a "utility death spiral" abound.

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Seventh Circuit Rejects FERC's Cost-Spreading Mechanism for High-Voltage Transmission, Raising Questions for the Pacific Northwest

July 1, 2014

Last week, the U.S. Court of Appeals for the Seventh Circuit once again rejected a cost-spreading mechanism developed by the Federal Energy Regulatory Commission ("FERC") for high-voltage transmission facilities constructed in the PJM Interconnection. While PJM is located on the opposite coast, the Seventh Circuit's decision may nonetheless have important implications for transmission construction here in the Pacific Northwest.

The basic problem FERC has wrestled with is that utilities in the eastern end of PJM's footprint in the heavily-populated mid-Atlantic region will benefit disproportionately from construction of high-voltage transmission. By contrast, utilities in the western portion of PJM will receive only modest benefits from high-voltage transmission construction, which is currently driven largely by the need to improve reliability in the east. FERC has been wrestling with this problem for more than seven years, with final resolution likely several years away. In the Northwest, the problem is a mirror image of PJM -- congestion and reliability problems are largely in population centers along the West Coast, meaning that high-voltage transmission upgrades are likely to disproportionately benefit utilities serving these areas.

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U.S. Supreme Court Denies Review of California Low-Carbon Fuel Standard

June 30, 2014

The U.S. Supreme Court today denied several petitions seeking review of the Ninth Circuit's decision upholding California's Low-Carbon Fuel Standard ("LCFS") against claims that the LCFS violates the Commerce Clause of the U.S. Constitution. While today's decision makes the Ninth Circuit's decision final, the underlying issue -- how far individual states can go to regulate greenhouse gases and promote renewable energy without violating the Commerce Clause -- will remain the subject of intense litigation. For example, recent lower-court decisions from Colorado and Minnesota, reaching apparently opposite conclusions on the constitutionality of state renewable portfolio requirements, suggest that the Supreme Court may ultimately have to step into the fray.

As we've previously reported here and here, California's LCFS requires petroleum distributors in the state to reduce the carbon intensity of motor fuels they sell by blending them with biofuels or other lower-carbon alternatives. The LCFS contains a complex mechanism which uses a life-cycle analysis to assign carbon intensity scores to different biofuels production processes, providing a significant economic advantage to fuels with lower carbon intensity scores. This mechanism was challenged by a coalition of out-of-state alcohol fuels producers and trade groups, who argued that California's mechanism discriminates against them on its face by assigning higher carbon intensity scores to out-of-state producers than in-state producers. California rebutted these claims by asserting that its life-cycle analysis model is location-neutral and reflects the reality that production of alcohol fuels in some areas has a greater carbon footprint than fuels produced within California. Alcohol fuels produced in the Midwest, for example, generally have a higher carbon footprint than fuels produced within California because Midwest biofuels are produced using electricity from a grid that relies more heavily on coal-fired plants and because of the lengthy transportation routes required to deliver Midwest fuels into California add to the out-of-state fuel's carbon intensity.

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Six GTH Energy and Environmental Named Washington "Super Lawyers"

June 23, 2014

We're pleased to announce that nineteen Gordon Thomas Honeywell attorneys have been named 2014 Washington Super Lawyers, including six members of our Energy, Telecommunications & Utilities and Environmental & Natural Resources practice groups.

The "Super Lawyers" practicing in our energy, environmental, and natural resources areas are Margaret Archer, Eric Christensen, Don Cohen, Brad Jones, and Bill Lynn. In addition, practice member Bill West has been named a "Rising Star."

"Super Lawyers" are selected through a process of peer review and independent evaluation, and represent the top five percent of practitioners in the State of Washington.

U.S. District Court Rejects Broad Commerce Clause Attack on Colorado's Renewable Portfolio Standard

May 13, 2014

On May 9, the Judge William J. Martinez of the U.S. District Court for the District of Colorado summarily dismissed a broad-based challenge to the Colorado Renewable Portfolio Standard ("RPS"), which argued that the RPS per se violates the "dormant" Commerce Clause of the United States Constitution. The decision supports the view that a RPS will pass muster under the Commerce Clause as long as it regulates in-state and out-of-state generators in an even-handed way, and does not impose restrictions on RPS eligibility that favor in-state generators over out-of-state generators. Energy & Environmental Legal Inst. v. Epel et al., No. 11-cv-00859-WJM-BNB (issued May 9, 2014).

Enacted by Colorado voters in 2004 and amended several times since, the Colorado RPS now requires Colorado's investor-owned utilities to obtain 30% of their electricity from renewable sources by 2020, while cooperatives serving 100,000 or more meters must meet a 20% standard, and smaller cooperatives and municipal utilities must meet a 10% standard. In 2011, plaintiff Energy and Environmental Legal Institute (then known as the American Traditions Institute) filed a lawsuit seeking to invalidate Colorado's RPS statute on Commerce Clause grounds. Last week's decision rejects that challenge in its entirety, although plaintiffs have indicated they plan to appeal to the U.S. Court of Appeals for the Tenth Circuit.

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Texas Supreme Court Blows Away Wind Generator Claims, Finds Contracts Assigned Risk of Transmission Congestion to Generators

April 2, 2014

Transmission congestion between the wind-rich plans of western Texas and population centers to the east frequently force curtailment of deliveries of electricity from Texas wind farms. In a contract dispute worth tens of millions of dollars, the Supreme Court of Texas recently concluded that wind energy producer FPL Energy assumed the risk of transmission curtailments and therefore must pay contractual damages for delivery failures caused in large part by transmission curtailments. The decision, which turns on specific language addressing transmission curtailments in a contractual "Uncontrollable Forces" clause, once again underscores the peculiar importance of such clauses in energy contracts.

The Court also disallowed a lower court's $29 million judgment against FPL Energy under the liquidated damages provisions of the relevant contracts. The Court found that the liquidated damages clause was intended to compensate the purchaser for undelivered Renewable Energy Credits ("RECs"). The clause provided for recovery of $50 per each undelivered REC, an amount based on the penalty to be paid by utilities in Texas if they do not purchase enough RECs or renewable energy to satisfy the state's Renewable Portfolio Standard. The Court concluded that the liquidated damages provision crossed the line from an acceptable estimate of actual contract damages to an unacceptable contractual penalty for breach because it assumed TXU would pay the $50 penalty rate for all RECs not delivered, but in fact the Texas regulatory scheme excuses compliance for any RECs not delivered because of transmission constraints or curtailments. As a result, the liquidated damages provision required FPL Energy to pay approximately $29 million, whereas the actual losses suffered because the RECs were not delivered was only about $6 million, possibly less. Thus, there is an "unacceptable disparity" between the results of the liquidated damages provision and the actual damages incurred by TXU as a result of FPL's failure to deliver.

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Bully for Biomass: Washington Supreme Court Rejects Greenhouse Gas Claims, Upholds Finding of No Significant Environmental Impact for Biomass Facility

February 27, 2014

The Washington Supreme Court today rejected claims that the potential for greenhouse gas ("GHG") from a biomass facility triggers the requirement to prepare a full Environmental Impact Statement under Washington's State Environmental Protection Act ("SEPA"). Today's decision promises to greatly simplify the permitting process for projects planning to use woody biomass and should help clarify how GHG emissions are treated for biomass-fired facilities, a question that has bedeviled courts and regulators in other contexts. PT Air Watchers et al. v. State of Washington et al., No. 88208-8 (issued Feb. 27, 2014).

The controversy arose from Port Townsend Paper Company's plans to modernize the boiler at its paper mill by increasing the use of woody biomass to fuel the boiler, increase the boiler's firing efficiency, and adding a 25 megawatt generator to produce electricity. The paper company prepared a SEPA "checklist" in accordance with WAC 197-11-960. The checklist concluded that, because the project would reduce burning of fossil fuels by burning woody biomass instead, it would produce a net reduction in GHG emissions. The Department of Ecology agreed, concluding that no EIS was required because the project would not produce significant environmental impacts. A coalition of local environmental groups challenged this finding, but the challenges were rejected both in an administrative appeal and by the reviewing courts. The Washington Supreme Court accepted review and today affirmed Department of Ecology's finding that no significant environmental impacts requiring preparation of an EIS would result from the project.

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Ninth Circuit Denies Rehearing in Greenhouse Gas Case, Continues to Struggle With Standing in Climate Litigation

February 13, 2014

A recent order of the U.S. Court of Appeals for the Ninth Circuit illustrates the extent to which courts continue to struggle with otherwise routine legal issues when confronting claims related to climate change and greenhouse gas emissions. The order denies rehearing of last year's Ninth Circuit panel decision in Washington Environmental Council v. Bellon, which concluded that a group of environmental plaintiffs seeking to force the Washington Department of Ecology to issue greenhouse gas regulations lacked standing to bring the claim.

The rehearing order was unusual in several respects. Ordinarily, a dissatisfied party to the case seeks rehearing and, in nearly all cases, rehearing is denied in a short order simply noting that an insufficient number of judges supported the request for rehearing. Perhaps the most unusual aspect of the Ninth Circuit's order is that it arose from a Ninth Circuit judge seeking rehearing, rather than from one of the parties. This suggests that at least some of the Ninth Circuit's judges view the October panel opinion as not just incorrect, but so seriously wrong that the Court should re-examine the decision even in the absence of any request to do so by the losing parties. The order is also unusual in that it included two impassioned opinions alternatively defending and attacking the October panel opinion.

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SLAPP Suit Blocked: Court of Appeals Rejects SLAPP Claim in Public Records Act Case

February 3, 2014

The Washington Court of Appeals today concluded that Washington's "anti-SLAPP" statute cannot be invoked when a municipality seeks a declaratory judgment to clarify its obligations under the Public Records Act. The Court's conclusions should be a welcome relief for Washington municipalities seeking to clarify their obligations under the Public Records Act and thereby to minimize their exposure to the substantial penalties that are sometimes imposed under the Act. City of Seattle v. Egan, No. 69129-5-I (Wash. App. Div. I, filed Feb. 3, 2014).

The Court of Appeal's decision arises from a Public Records Act request for documents related to an internal investigation of complaints filed against four Seattle police officers. Among the documents requested are 36 "dash-cam" videos. Believing the videos are exempt from disclosure under RCW 9.73.090(1)(c), which prohibits cities from providing videos to the public when legal action involving those videos is pending, the City withheld 35 of the 36 videos. In the face of threat of lawsuit seeking to force disclosure of the videos, the City filed a motion for declaration and preliminary injunction, asking the lower court to declare that the 35 videos are exempt from Public Records Act disclosure. The Public Records Act authorizes this procedure under RCW 42.56.540.

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Washington Supreme Court Limits Recreational Immunity Statute

January 30, 2014

In a decision of great importance to major Washington landowners, including local governments, major private landowners such as forest products companies, and operators of water projects, the Washington Supreme Court today issued an opinion that may limit the state's recreational immunity statute. As a result of the decision, the immunity conferred by the statute is clouded in mixed-use situations, where access to land is granted for both recreational and other uses, such as transportation. Camicia v. Howard S. Wright Constr. Co., No. 85583-8 (issued Jan. 30, 2014).

First passed in 1967, the recreational immunity statute is intended to encourage landowners to open lands, as well as waterways associated with hydroelectric projects and similar facilities, to recreational users. The statute encourages recreational access by immunizing those landowners from liability for unintentional accidents where no fee is charged for recreational access.

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