GTH Energy & Natural Resources Law Blog

In May, the federal courts rejected two more major cases in which plaintiffs sought damages from large emitters of greenhouse gases based on claims of climate-caused property damage. As a result of the U.S. Supreme Court's action, one of the major theories espoused by plaintiffs -- federal common law nuisance -- now appears to be dead. The fate of other major theories, however, remains uncertain because a federal appeals court could not escape a procedural tangle and therefore failed to definitively address those theories.

In the first case, involving the Native Village of Kivalina, Alaska, the Supreme Court denied a petition for certiorari filed by the plaintiffs, whose claim was earlier rejected by the U.S. Court of Appeals for the Ninth Circuit. As reported here previously, the Kivalina plaintiffs claimed that release of greenhouse gases has caused a significant decline of Arctic sea ice. Without the protection of sea ice, wave and storm damage from the Arctic Sea eroded the land underlying the Village. Under the plaintiffs' theory, greenhouse gas emitters are responsible for this property damage because greenhouse gases have caused the sea ice decline. The Ninth Circuit rejected Kivalina's claims, based on the federal common law of nuisance, concluding that federal common law has been displaced by the federal regulatory scheme under the Clean Air Act, which, as interpreted by the Supreme Court's 2007 opinion in Massachusetts v. EPA, reaches greenhouse gases as well as more traditional "criteria" pollutants. The Supreme Court's denial of certiorari appears to be the last gasp for climate lawsuits based on the federal common law. (Native Village of Kivalina v. Exxon Mobil Corp. et al. (Sup. Ct. Docket No. 12-1072).

Continue reading "May: A Tough Month for Climate Plaintiffs, But Odd Fifth Circuit Decision Leaves the Door Ajar" »

In a decision with important implications for both renewable energy and transmission developers, the U.S. Court of Appeals for the Seventh Circuit last week largely upheld a cost-spreading mechanism developed by the Midwest Independent Transmission System Operator ("MISO") to encourage expansion of high-voltage transmission facilities. Written by the renowned Judge Richard Posner, the decision (Illinois Commerce Commission v. Federal Energy Regulatory Commission, 7th Cir. Docket Nos. 11-3421 et al., issued June 7, 2013) may in time be most remembered for lighting the fuse that ultimately brought down the many state renewable energy policies that artificially favor in-state renewable producers at the expense out-of-state producers.

The holding is a response to Michigan's argument that it does not benefit from the high-voltage transmission lines favored by the MISO policy. Because its Renewable Portfolio Standard does not allow Michigan utilities to count out-of-state renewables toward meeting the requirement that they obtain ten percent of their power from renewables by 2015, improving transmission for out-of-state renewables does not benefit Michigan ratepayers. Thus, Michigan argued, it should not be required to bear a share of the cost of these facilities. Judge Posner rejected this argument in strikingly plain terms: "Michigan cannot, without violating the commerce clause of Article I of the Constitution, discriminate against out-of-state renewable energy." This holding threatens to unravel state laws from California to Massachusetts that, in various ways, artificially favor in-state renewable producers over out-of-state producers.

Continue reading "Casting A Constitutional Cloud On In-State Renewable Preferences, Seventh Circuit Upholds Transmission Cost-Spreading" »

The Washington Supreme Court recently handed a significant victory to Washington's Public Utility Districts when it denied a petition for review of Shoulberg v. Public Utility District No. 1 of Jefferson County. Pursuing a long-standing grievance, taxpayers in Port Townsend filed a class-action lawsuit challenging the PUD's taxation of Port Townsend property owners. The Superior Court and the Washington Court of Appeals (169 Wn. App. 173, 280 P.3d 491 (2012)) rejected the challenge. With the Supreme Court's denial of the petition for review, the Court of Appeals decision is now the final word.

The case involves interpretation of RCW 54.04.030, the section of the PUD statute aimed at preventing duplication of services when PUDs are established in counties with municipal utility systems. The taxpayer plaintiffs argued that property taxes imposed on Port Townsend property owners by the PUD violated the statute's prohibition on duplicative taxation, which prohibits taxation of "property situated within" any city to "pay for any utility, or part thereof, of like character to any utility, owned or operated by such [city]."

Continue reading "Jefferson County PUD Prevails In Tax Dispute; GTH Successfully Defends Summary Judgment Dismissal of Class Action Lawsuit" »

We're proud to announce that GTH partner Eric Christensen penned the cover story in the May 2013 issue of the Northwest Public Power Association Bulletin. Here is the text of the article:

The rapid rise of variable renewable resources, especially wind power, has put increasing pressure on the West's electric system to balance the rapidly fluctuating output often produced by these resources. In response, a regional Energy Imbalance Market ("EIM") is now under active consideration. The EIM would allow Balancing Area Authorities ("BAAs") to obtain balancing reserves from across a broad region, in theory allowing more economic and reliable operation of the region's balancing capacity. Public power has greeted EIM with considerable skepticism, observing that Regional Transmission Organizations ("RTOs") and other "organized markets" have often failed to produce expected benefits.

Public power is equally concerned that an EIM could subject public power systems to Federal Energy Regulatory Commission ("FERC") jurisdiction. Centralized control by FERC is, of course, the antithesis of local control, one of public power's keystone values. FERC's recent tendency to pursue its jurisdiction aggressively on behalf of renewable producers heightens this concern. For example, FERC in 2011 for the first time asserted its "FERC-lite" jurisdiction, invalidating the Bonneville Power Administration's approach to managing periods of excess wind generation.
As this article explains, public power is right to be concerned that an EIM could result in both expanded FERC jurisdiction and a broader push toward a West-wide RTO. Both risks, however, can be mitigated by insisting on specific structures and conditions for EIM participation.

Relevant Precedents: FERC Jurisdiction Over Consumer-Owned Utilities Operating in Organized Markets

In the industry's first few decades, federal jurisdiction was of little concern to public power. Public power operated in its own sphere, governed by elected representatives of the citizens it serves, generally free from either state or federal rate regulation. With increasing integration of the industry and regulatory restructuring, these jurisdictional lines have blurred. In some cases, Congress added new statutory authority giving FERC jurisdiction over specific aspects of consumer-owned systems. In other cases, FERC leveraged its existing statutory authority. For example, to enforce its "open access" transmission regime, FERC required consumer-owned transmission systems to adopt "Safe Harbor" open access tariffs so that they could obtain "reciprocal" access to IOU-owned transmission facilities.

An examination of recent precedents from Western RTOs and cooperative transmission ventures demonstrates that there is some basis for concern that participation in an EIM could subject a consumer-owned utility to new FERC jurisdiction. Perhaps most notoriously, after the meltdown of Western power markets in 2000-01, FERC attempted to force public power entities that had participated in the California ISO and PX markets to disgorge refunds. Ultimately, the Ninth Circuit rejected those attempts, concluding that the Federal Power Act plainly prohibits FERC from exercising its refund authority over public power entities. The Court, however, left the door open for California to pursue refunds in court. This opening has proved costly for public power. For example, in April, the U.S. Court of Claims allowed California's contract-based lawsuit against the Bonneville Power Administration ("BPA") to move forward. This is a particularly bitter pill for Northwest public power ratepayers, many of whom suffered greatly from California's missteps during the 2000-01 market meltdown and were generally denied relief by FERC. They now face the prospect of paying again for California's mistakes, this time through inflated BPA rates.

The Courts have also concluded that consumer-owned utilities participating in the California Independent System Operator ("ISO") may be subject to just-and-reasonable rate regulation where the rates charged by the consumer-owned utility affect the FERC-jurisdictional rates charged by the ISO. When the City of Vernon, California's municipal utility joined the ISO, the rates charged by Vernon for ISO-administered access to Vernon's transmission system became an element of the transmission rates charged by the ISO. FERC concluded that, because Vernon's transmission rates were an element of the ISO's transmission rates, Vernon's rates must be subject to FERC oversight to ensure that the resulting transmission rates charged by the ISO are just and reasonable. After extended litigation, the Ninth Circuit ultimately upheld this result.
FERC has asserted a similar form of jurisdiction over public power entities in other regions, as well. For example, where Basin Electric Cooperative entered into a joint-use transmission arrangement with a FERC-jurisdictional IOU, FERC asserted jurisdiction to review Basin's transmission rates because Basin's rates are a component of the rates charged by the joint-use system.

On the other hand, the courts have flatly rejected FERC attempts to force changes in the management structure of the RTOs and ISOs. Following the 2000-01 crisis, FERC concluded that the ISO's management structure was partly to blame for market dysfunctions, and attempted to force a change in the composition of the ISO Board. The U.S. Court of Appeals for the D.C. Circuit rejected FERC's assertion of authority. Of particular interest, the Court of Appeals rejected FERC's claim that its authority to regulate the "practices" of jurisdictional utilities allows FERC to order specific changes in the management of those utilities. FERC's reading of the statute, the Court concluded, ignores the surrounding statutory language, which is aimed at providing FERC with authority to regulate rates, not every aspect of utility operations. Thus, the Court reasoned, FERC can regulate utility "practices" only if they are directly connected with the utility's rates. Because there was no clear connection between the structure of the ISO's board and the rates it charged, the Court concluded, FERC's attempt to dictate the structure of the ISO's governing board exceeded its statutory authority.
In summary, the participation of consumer-owned utilities in "organized markets" such as the California ISO is a mixed bag. FERC has on a number of occasions asserted jurisdiction over consumer-owned utilities participating in ISOs or RTOs. And, while the Courts have rejected some of these assertions, they have upheld others. Consumer-owned utilities contemplating participation in the EIM are therefore well-advised to exercise caution if they wish to avoid becoming subject to increased FERC jurisdiction.

Limiting FERC Jurisdiction in an EIM
While exposure to FERC jurisdiction is a valid concern, expanding FERC jurisdiction need not follow inevitably from a decision to participate in the EIM. For example, a number of consumer-owned utilities participate along with FERC-jurisdictional IOUs in regional transmission bodies such as ColumbiaGrid and WestConnect. FERC precedent regarding these and similar regional ventures demonstrate that, with appropriate safeguards, FERC's assertion of jurisdiction over consumer-owned participants can be limited.

Such safeguards include:

• Defining off-ramps for consumer-owned utilities. Perhaps the best safeguard for consumer-owned utilities is a clear "off-ramp," allowing them to terminate their participation in EIM if FERC attempts to extend its jurisdiction over them. For example, WestConnect proposed a transmission pilot project aimed at reducing the "pancaking" of transmission rates across the systems of its members, which included both jurisdictional IOUs and non-jurisdictional co-ops and consumer-owned utilities. FERC approved an agreement allowing participants to withdraw at any time prior to the start-up of the pilot, at any time after start-up as a result of adverse regulatory action, and after ninety days' notice for any other reason occurring after start-up. Similarly, the Nebraska Public Power District ("NPPD") and Omaha Public Power District ("OPPD") in the Southwest Power Pool are authorized to withdraw from the Southwest Power Pool if FERC does not accept their rates or transmission revenue requirements. The ability to withdraw from the organization administering EIM in response to an unjustified claim of FERC jurisdiction gives consumer-owned participants powerful leverage to prevent FERC from overstepping its bounds.

• De-coupling jurisdictional and non-jurisdictional rates. It may be possible to structure an EIM so that the rates paid to non-jurisdictional utilities remain separate and distinct from the rates paid to FERC-jurisdictional IOUs. For example, before the WestConnect transmission pilot discussed above went into effect, FERC declared that the rates charged by non-jurisdictional utilities were not subject to FERC review because they did not affect rates charged by jurisdictional IOUs and additional safeguards, such as rate caps, were in place to ensure that jurisdictional rates remain just and reasonable. Similarly, FERC has approved participation of NPPD and OPPD in the Southwest Power Pool subject to agreements that explicitly limit FERC's authority to review the NPPD's and OPPD's rates or revenue requirements. As these examples demonstrate, it may be possible to limit FERC jurisdiction by separating EIM rates paid to non-jurisdictional utilities from rates paid to jurisdictional utilities, or by insisting upon specific contractual limits on FERC jurisdiction over public power.

• De-coupling the EIM market from transmission rates. The EIM should be limited to the specific function of allowing regional exchange of regulating reserves and other sub-hourly products. It should not operate a centrally-administered transmission market. Limiting the EIM's functions in this manner will prevent FERC from attempting to leverage its jurisdiction over interstate transmission.

• Recognizing public power authorities. The authority of public power governing bodies to set their own rates and policies is, of course, a cornerstone of the public power movement. Similarly, consumer-owned utilities operate under unique limitations arising from, for example, state law and from federal rules governing municipal bonds. Consumer-owned utilities participating in the EIM should insist on language in governing agreements that will prevent the actions of the EIM from violating state law, putting tax-exempt financing at risk, or displacing the basic functions of publicly-elected governing bodies. Such mechanisms not only assure consumer-owned utilities that they are operating within the boundaries of existing law, but also serve to limit FERC jurisdiction by requiring FERC to abide by the legal limits faced by consumer-owned utilities.

It is important to recognize that, in the Energy Policy Act of 2005, Congress granted FERC new refund authority over consumer-owned utilities. This new authority allows FERC to order refunds from consumer-owned utilities for short-term sales (sales for periods of less than one month) if the sales are "through an organized market in which the rates for sale are established by [FERC]-approved tariff (rather than by contract)" and the sale violates that tariff. FERC has yet to provide any clear guidance as to the meaning of this new authority. Hence, consumer-owned entities contemplating participation in an EIM must recognize the existence of the new authority, devise strategies for limiting the authority, and consider the possibility that their short-term sales on the EIM could be subject to FERC-ordered refunds.

Limiting EIM Expansion
As with FERC jurisdiction, public power is rightly concerned that, even if an EIM is wise, it could pave the way for a full-fledged RTO, with its attendant costs, complications, and market manipulation risks. In the same way that public power participants in an EIM should insist on limits to FERC jurisdiction, they should also insist on limits that prevent EIM from becoming a "slippery slope" to a West-wide RTO.

Two considerations are key. First, there is no reason that the EIM itself should be considered an RTO. On the contrary, if the functions of the EIM are strictly limited to its core mission, it would not be an RTO because it would not operate all the functions of an RTO. Rather, it would be more like ColumbiaGrid or WestConnect, organizations which perform limited transmission functions but are neither registered as an RTO nor considered to be an RTO by FERC.

Second, the governing documents of EIM should either prohibit expansion of the organization or else require a supermajority to move forward with any new functions. For example, ColumbiaGrid's governing documents allow it to take on new functions only with a super-majority vote of its members. Such a supermajority requirement can prevent movement toward in RTO unless a strong regional consensus, which necessarily must include public power, develops in favor of RTOs.
 

Conclusion
Public power has good cause to be concerned that participation in an EIM could result in expanded FERC jurisdiction over consumer-owned utilities and could be a step toward a West-wide RTO. These are not inevitable consequences of an EIM, however, and a number of proven safeguards are available to prevent these outcomes if consumer-owned utilities elect to participate in the EIM.

(Note: While the article is officially the "Cover Story" of the May NWPPA Bulletin, the photo on the cover is in fact a vendor from NWPPA's recent Engineering and Operations Conference. This is because, despite a valiant effort, NWPPA's editors could not find a compelling graphic concerning the EIM or FERC jurisdiction.)

The Washington Supreme Court late last week issued a pair of opinions that provide a road map for public agencies struggling to reconcile disclosure obligations under the Washington Public Records Act ("PRA") with the thicket of state and federal laws protecting information from public disclosure. Read together, the decisions clarify how public agencies should treat information that is protected from disclosure under either federal law or under the multitude of exemptions from public disclosure provided by Washington law. The cases also serve as a powerful reminder that Washington public agencies must have public disclosure policies in place and carefully follow those policies -- with assistance from legal counsel, if required -- when responding to requests for disclosure of public records. Finally, the Court seems to have gone out of its way to provide guidance on its view of how the Public Records Act should be applied. It may therefore be advisable for public agencies with a disclosure policy in place to review the policy in light of the Court's new guidance.

The opinion in Resident Action Council v. Seattle Housing Authority leaves the reader with a sense of the Court's frustration that Washington public agencies seem regularly to misunderstand or misapply the PRA. The Court seems to imply that such errors help make the PRA one of the most litigated statutes before the Court. Despite Chief Justice Madsen's concurrence arguing that the Court goes well beyond what is required to decide the case, the opinion expends a good deal of ink setting forth the analytical framework the Court believes public agencies should follow when responding to PRA requests.

As an over-arching framework, the Court identifies five "indispensable steps" an agency must go through in responding to a PRA request, and even includes a flow chart to illustrate these steps. In essence, the flowchart is simply a way to illustrate the familiar principle that public agencies have an obligation to disclose public records unless the record is subject to an exemption and, if the record is subject to an exemption, to disclose redacted records. If the agency has properly determined that the information is protected, it can be released only "in rare cases" where a judge concludes that continued protection of the information is "clearly unnecessary."

The Court adds a new step to this analytical framework, identifying a system for classifying the PRA's141 exemptions and explaining how the different classes of exemptions should be analyzed. The Court divides the PRA's exemptions into "categorical" exemptions and "conditional" exemptions. Categorical exemptions are those that "exempt without limit a particular type of information or record." For example, RCW 42.56.230(a) categorically exempts debit card numbers from public disclosure. Conditional exemptions are those that exempt a particular type of information from public disclosure, "but only insofar as an identified privacy right or vital governmental interest is demonstrably threatened in a given case." For example, the PRA exempts from disclosure the identity of crime victims but only "if disclosure would endanger any person's life, physical safety, or property." RCW 42.56.240(2). The Court's opinion includes an appendix that categorizes all 141 PRA exemptions as either categorical, conditional, or, in the case of four exemptions, "ambiguous."

Continue reading "Public Records at the Intersection of Personal Privacy, Public Disclosure, and Litigation: Washington Supreme Court Clarifies Public Records Act Obligations" »

The Washington State Court of Appeals today issued an opinion finding that Washington Public Utility Districts ("PUDs") have the statutory authority to condemn state school trust lands in order to construct transmission lines and other utility infrastructure. Today's opinion is the latest chapter in a twisting saga that began in 1996, when Okanogan County PUD began planning a new transmission line between existing substations in Pateros and Twisp in the Methow Valley. The opinion confirms that, unless state lands have been dedicated to a particular public use, PUDs have authority to condemn those lands for utility purposes. By extension, the opinion should allow other Washington municipalities, such as Port Districts, cities, and towns, to condemn state lands for public purposes because they have statutory condemnation authority similar to that of PUDs.

The long and winding road of litigation began with a decade of environmental review, culminating in a Court of Appeals opinion confirming that Okanogan PUD's environmental review met required standards and that the PUD did not act arbitrarily in selecting the route for the transmission line. (Gebbers v. Okanogan County Public Util. Dist. No. 1, 144 Wn.App. 371, 183 P.3d 324, rev. denied, 165 Wn.2d 1004, 198 P.3d 511 (2008)). The PUD then began obtaining easements covering the selected route. After negotiating easements for about 85% of the required land, the PUD then filed a petition for condemnation against the remaining property owners. Among the parcels involved in the condemnation proceeding was a tract of state school trust lands.

Continue reading "Washington Appeals Court Finds PUDs Have Authority to Condemn Public Trust Lands" »

In the latest chapter of decades-long litigation over the treaty rights of Washington's Native American tribes, the U.S. District Court for the Western District of Washington recently ordered three Washington state agencies to remove culverts from state-managed roads that block access to salmon spawning habitat. (U.S. v. Washington, No. CV 70-9213 (issued March 29, 2013)). The order requires culvert replacement to be completed by the fall of 2016 on state recreational lands, and by 2030 on highways administered by the Washington State Department of Transportation ("WSDOT").

The litigation has roots dating all the way back to Washington's earliest days as a U.S. territory. Among other duties, Isaac Stevens, Washington's first territorial governor, entered a series of treaties with Washington's Native American tribes. In return for ceding large amounts of land, the Stevens treaties provided: "The right of taking fish at all usual and accustomed grounds and stations, is further secured to said Indians, in common with all citizens of the Territory." More than a century later, this language became the linchpin of the U.S. District Court's foundational 1974 opinion, United States v. Washington, 384 F. Supp. 312 (W.D. Wash. 1974), which held that the Stevens treaties entitled the tribes to fifty percent of the state's "harvestable" fish. Often called the "Boldt Decision," after its author, the late District Judge George Boldt, the decision was the culmination of a political movement, complete with civil disobediance, celebrity "fish-ins, and sometimes violent clashes. The decision was upheld by the U.S. Court of Appeals for the Ninth Circuit and largely upheld by the U.S. Supreme Court. The practical result of the decision is that Washington's tribes have become "co-managers" of the state's fishery resources.

Continue reading "Federal Judge Orders Washington to Remove Salmon-Blocking Culverts" »

The U.S. Court of Appeals for the Ninth Circuit today revived a class-action antitrust case against a large assemblage of natural gas sellers and marketers who were allegedly involved in manipulating Western natural gas prices during 2000-01. Manipulation of gas prices was one factor contributing to the meltdown of Western electricity markets during the same period. The court's decision, entitled In re: Western States Wholesale Natural Gas Antitrust Litigation, limits the extent to which the Federal Energy Regulatory Commission's exclusive jurisdiction under the Natural Gas Act ("NGA") preempts private antitrust claims under both state and federal law.

While the immediate effect of the court's decision is to allow plaintiffs harmed by the alleged gas market manipulation to seek potentially substantial antitrust remedies, the decision is likely to have long-term import well beyond the specifics of the particular facts addressed by the court. This is so because the NGA is one of a family of similar New Deal-era statues which also includes statutes like the Federal Power Act and the Federal Communications Act, and the court's decision turns on language that is common to this family of statutes. Further, the court opens the way for antitrust damage claims that allow injured private parties to seek damages, including treble damages, against market manipulators. These private actions will serve to bolster FERC's recently-intensified battle against energy market manipulation, which extends to the power markets as well as the natural gas markets.

Continue reading "Market Manipulation, Preemption, and FERC Jurisdiction: Antitrust Claim from 2000-01 Crisis Revived By Ninth Circuit" »

In an important victory for users of treated wooden poles, the U.S. Court of Appeals for the Ninth Circuit last week concluded that wooden utility poles are neither a "point source" subject to regulation under the Clean Water Act ("CWA") nor a "solid waste" subject to regulation under the Resource Conservation and Recovery Act ("RCRA"). The decision is an important landmark for electric utilities, telecommunications carriers, and other companies using treated wooden poles. If the court had reached the opposite result, these industries could have been subject to burdensome new regulation under both the CWA and RCRA.

The Ninth Circuit's decision, Ecological Rights Foundation v. Pacific Gas & Electric Co., rejects a lawsuit brought under the citizen suit provisions of the CWA and RCRA by a California environmental organization. The environmental plaintiff claimed that PCP and other wood treating chemicals are washed into the environment by rainwater, resulting in a "discharge" of a pollutant requiring the owner of wood poles to obtain a NPDES permit under the CWA. Relying on the U.S. Supreme Court's recent decision rejecting a similar claim with respect to logging roads, the Ninth Circuit rejected this claim, as well. The court found that wooden poles are not a "point source" subject to CWA regulation. In particular, under EPA's approach to regulation of stormwater discharges, governed by 1987 amendments to the CWA, no NPDES permit is required because wood poles are not "associated with industrial activity," as would be the case at an industrial plant or storage area where rainwater is captured and channeled.

Continue reading "Poles Left Standing: Ninth Circuit Rejects Claim That Utility Poles Must Be Regulated Under the Clean Water Act and the Resource Conservation and Recovery Act" »

On March 20, the U.S. Supreme Court ruled that the discharge of channeled stormwater runoff from logging roads is not a "point source," and logging operators therefore are not required to obtain a permit from the Environmental Protection Agency ("EPA") under the Clean Water Act ("CWA"). Although important to a key Northwest industry, the decision is not unexpected. Under its "Silviculture Rule" (40 C.F.R. Sec. 122.27(b)(1)), an administrative interpretation of the "point source" requirement, EPA has long held that stormwater runoff from logging roads is not a point source, and timber harvesters are therefore not required to obtain an NPDES permit before constructing roads. The decision, Decker v. Northwest Environmental Defense Center, also follows a pattern that has become almost routine in recent years -- the Supreme Court reversing the Ninth Circuit in an environmental case where the Ninth Circuit embraces a novel reading of the relevant statute. In fact, as previously noted here, the Supreme Court this term has already reversed a Ninth Circuit decision on the "point source" question in a case with strong implications for operators of dams, flood control facilities, canals, and other kinds of water works.

More surprising are strong suggestions in the concurring and dissenting opinions that the Court's conservative wing may be ready to re-examine one of the foundational principle of administrative law -- that an agency's interpretation of its own regulation is entitled to deference from the courts. Justice Scalia's dissent in Decker attacks this rule as an affront to "a fundamental principle of separation of powers -- that the power to write a law and the power to interpret it cannot rest in the same hands." Stepping past the EPA's interpretation, Justice Scalia sides with the environmental plaintiffs (and the Ninth Circuit), concluding that runoff from logging roads that is channeled into ditches and culverts is a "point source" under the statutory definition, which includes any "pipe, ditch, channel, tunnel, [and] conduit."

Continue reading "U.S. Supreme Court Rules That Logging Roads Do Not Require NPDES Permits; Scalia Dissent Suggests Major Change Afoot in Administrative Law" »

On Friday, the U.S. Court of Appeals for the D.C. Circuit concluded that the Federal Energy Regulatory Commission ("FERC") lacks jurisdiction to enforce a $30 million fine against accused natural gas market manipulator Brian Hunter. The D.C. Circuit's opinion provides some needed clarity to the lines of regulatory jurisdiction where manipulation involves both physical natural gas and electricity markets and forward commodity futures markets. In such cases, the D.C. Circuit's opinion makes clear that FERC's jurisdiction is limited to the physical markets, while the Commodity Futures Trading Commission's ("CFTC") exclusive jurisdiction extends to the energy commodity futures markets.

As reported in more detail previously, the case arose from alleged manipulation of the NYMEX futures market for natural gas by Brian Hunter, then a trader for the Amaranth hedge fund. According to FERC's investigation, Hunter "shorted" his position in the natural gas market, then sold very large volumes of gas futures contracts during the February, March and April 2006 NYMEX settlement periods. The sales of commodity futures were intended to artificially depress natural gas prices, thus artificially benefitting Hunter's short position in the physical markets. In 2007, both FERC and the CFTC launched investigations of Hunter's activities, resulting in competing jurisdictional claims.

Continue reading "D.C. Circuit Rejects FERC Jurisdictional Claims Over Natural Gas Commodity Market Manipulation" »

The Washington Supreme Court today rejected tort claims based on exposure to Electromagnetic Fields ("EMF") from a utility substation. The Court's rejection of the EMF claim, which is consistent with similar conclusions reached by, for example, the California Supreme Court, is perhaps the final brick in the wall for EMF claims against electric utilities. The decision is therefore an important milestone in the effort, played out over the last several decades, to protect electric utilities from EMF claims with dubious scientific support. In addition, the Court rejected an inverse condemnation claim against the City of Kirkland, broadly protecting local land use decision-makers against tort liability.

The case, entitled Lakey v. Puget Sound Energy, arises from Puget Sound Energy's ("PSE") routine upgrade of an electric substation in a Kirkland, Washington neighborhood. Because the upgrade required relatively minor variances from the local zoning code, PSE sought variances from the City of Kirkland. Neighboring property owners unsuccessfully fought the variance. They then sued PSE, seeking damages for exposure to EMF from the substation and the City of Kirkland under an inverse condemnation theory. The trial court rejected both claims. After a Frye hearing, the trial court rejected the plaintiffs' expert scientific testimony as unreliable. And it rejected the inverse condemnation claim on legal grounds. The Court of Appeals certified the case for direct appeal to the Washington Supreme Court, which heard argument on October 18, 2012.

Continue reading "Washington Supreme Court Rejects EMF Damages Claim Against PSE and Kirkland, Relieving Major Liability Concern" »

In a decision with strong overtones for climate policy and federal permitting of projects that release greenhouse gases, the U.S. Court of Appeals for the D.C. Circuit today affirmed the U.S. Fish & Wildlife Service's ("FWS") decision to list the polar bear under the Endangered Species Act ("ESA"). The FWS decision, which is based on the danger to polar bear populations caused by declining sea ice in the Arctic, is one of the first major federal policies to address the consequences of climate change. Further, the decision means that projects releasing major quantities of greenhouse gas emissions may run afoul of the ESA, and that consultation with FWS under the ESA may become a routine regulatory requirement for such projects.

Legally, the decision is rather unremarkable. The petitioners, a group of industries, states, and aligned interests, challenged the FWS's listing decision on a number of technical grounds. But, as the D.C. Circuit observed, the challenges amount to "nothing more than competing views about policy and science." Under the familiar "arbitrary and capricious" standard of review for decisions of administrative agencies, such disagreements are insufficient to overturn an agency decision. Rather, as long as the agency has considered all the evidence, adequately explained its decision, and acted within the law, its decision, even if controversial, is not arbitrary and capricious. The D.C. Circuit concluded that the FWS did not act arbitrarily in the face of numerous challenges to its listing decision.

Continue reading "D.C. Circuit Upholds Endangered Species Act Listing of Polar Bear" »

Last week, the U.S. Court of Appeals for the Fourth Circuit struck down the National Marine Fisheries Service's Biological Opinion ("BiOP") concluding that certain pesticides jeopardize endangered Pacific salmonid species. The Fourth Circuit's ruling is the latest volley in litigation dating back more than a decade concerning the impacts of pesticide exposure on endangered salmon and steelhead. Because the Fourth Circuit remanded the BiOp for further action, the Court's opinion will not be the last word.

The litigation has its roots in the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), which requires the Environmental Protection Agency ("EPA") to register pesticides before they can be sold. Under 1988 amendments to FIFRA, EPA is required to re-register any pesticide that was originally registered prior to 1984 and, in doing so, to examine data concerning, among other things, whether the pesticide has "unreasonable adverse effects" on the environment. The first shot in the litigation war was fired in 2001, when a coalition of environmental groups filed suit in the U.S. District Court here in Seattle, successfully arguing that EPA's registration of pesticides is a "federal action." Because registration is a "federal action," EPA is required to consult under the Endangered Species Act ("ESA") with the relevant federal agencies to ensure that registration does not jeopardize the survival of listed species. The District Court's opinion requiring consultation was affirmed by the U.S. Court of Appeals for the Ninth Circuit in 2005.

Continue reading "Pesticides and Pacific Salmon: The Long and Winding Litigation Road Gets Longer as the Fourth Circuit Strikes Down NMFS's Biological Opinion" »

In a decision of great interest to Washington's Public Hospital Districts, Public Utility Districts, Port Districts, and many other state and local government entities, the Supreme Court this week issued an opinion clarifying and narrowing antitrust immunity for state and local governments. As a result of the decision, public agencies will need to exercise great care when taking actions that could restrict competition.

Under the "state-action immunity doctrine," the courts have long recognized that local government entities are immune from federal antitrust liability if they act under state law intended to restrict competition. But, for immunity to apply, a local government entity must act under a "clearly articulated and affirmatively expressed state policy to displace competition." This week's Supreme Court decision, FTC v. Phoebe Putney Health System, Inc., clarifies how this "clearly articulated and affirmatively expressed" test should be applied. The Court concludes that, while state legislatures need not explicitly state that they intend to restrict competition, limitation of competition must be the natural and logical consequence of the policy adopted by the state.

Continue reading "U.S. Supreme Court Narrows Antitrust Exemptions for Local Government Entities" »