Results tagged “U.S. Court of Appeals” from GTH Energy & Natural Resources Law Blog

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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Force Majeure Matters: Split Fifth Circuit Decision Reminds Energy Contract Drafters That Such Clauses Have Serious Consequences

January 30, 2013

While attorneys frequently treat force majeure provisions as a throw-away, a recent decision from the U.S. Court of Appeals for the Fifth Circuit underscores the importance of these provisions in energy contracts and contracts in other complex industries. That decision, Ergon-West Virginia, Inc v. Dynegy Marketing & Trade, determined that Dynegy's invocation of force majeure clauses in two natural gas contracts excused it from liability for failure to deliver natural gas in the wake of Hurricances Katrina and Rita. Notably, however, both the lower court and the dissenting Fifth Circuit judge reached the opposite conclusion with respect to one of the contracts.

While hurricanes might seem an obvious case of force majeure, Ergon argued that the clauses in its contracts with Dynegy excused Dynegy's performance only if Dynegy could not remedy the force majeure event with the exercise of due diligence. Because the contracts were general supply contracts, rather than contracts for delivery of gas from a specific source, Ergon argued that Dynegy could have met its delivery obligations by purchasing replacement gas on the open market. Ergon therefore sued, seeking to recover the cost it incurred to cover gas deliveries not made by Dynegy while Dynegy claimed force majeure from the hurricanes.

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