“The Texas Supreme Court denied a petition in one case and granted a petition in the other, both dealing with provisions in oil and gas leases,” reports John McFarland in Oil and Gas Lawyer Blog.

“The Court denied Chesapeake’s petition in Chesapeake v. Bell, construing an express drainage offset clause in Bell’s lease. The San Antonio Court of Appeals’ decision in favor of Bell stands – for now. The case goes back to the trial court for trial on the merits.”

“The Supreme Court granted Endeavor Energy’s petition for review in Endeavor Energy Resources v. Energen Resources, No. 18-1187, dealing with a continuous drilling provision in a lease retained acreage clause.”

“Endeavor owned an oil and gas lease on 11,303 acres of land in Howard County from John Thomas Quinn. The retained acreage clause allowed the lessee to retain all acreage after the primary term as long as no more than 150 days elapse between the completion of one well and the commencement of the next well. Endeavor drilled 12 wells, but then waited 300 days to spud the next well. Quinn then leased the acreage not earned by Endeavor’s 12 wells to Energen. This suit ensued.”

Read the full article.

“Sprague Resources LP has agreed to reduce air pollution from heated petroleum storage tanks at its facilities in South Portland, Searsport and five other New England cities, according to a federal lawsuit and proposed consent decree filed,” reports Kelley Bouchard in Press Herald’s Local & State.

“Under the proposed settlement, Sprague must properly license and take steps to reduce odors and emissions of volatile organic compounds, or VOCs, from heated tanks storing No. 6 heavy residual fuel oil and asphalt.”

“In addition to Sprague’s facilities in Maine, the settlement applies to tank farms in Everett, Quincy and New Bedford, Massachusetts; Newington, New Hampshire; and Providence, Rhode Island.”

“The federal Environmental Protection Agency had filed violation notices against Sprague’s facilities in recent years because they were unlicensed to store No. 6 oil or asphalt in heated tanks, according to the lawsuit filed in U.S. District Court in Boston.”

Read the article.

“In a letter addressed to Senator Chuck Grassley, Chairman of the Senate Committee on Finance, Treasury indicates its intention to revise the rules governing the deadline for construction of wind and solar projects to qualify for the production tax credit (PTC) and investment tax credit (ITC). The expected revised guidance would provide much needed relief to projects struggling with construction delays due to the COVID-19 pandemic,” reports in White & Case’s Publications & Events.

“Pursuant to current rules, consistent with several IRS notices, in order to qualify for either the PTC or ITC, wind and solar developers need to “begin construction” by a specific date, either by beginning “physical work of a significant nature” or by paying or incurring capital expenditures of at least 5 percent of the total cost of the project.”

“Once construction has begun, developers must further satisfy an additional “continuity” requirement by making continuous efforts to complete the project (in the case of the five percent safe harbor) or by maintaining a continuous program of construction until the completion of the project (in the case of the physical work test).”

Read the article.

“The government’s obsession with fossil fuels is clear, due to inscrutable causes unrelated to reason. However, it has reached implausible extremes. Now, through the National Energy Control Center (Cenace), and invading the powers of the Energy Regulatory Commission (CRE), it issued an agreement last Friday that prohibits operational tests of renewable power plants, and in practice blocks its operation and dispatch. It is unprecedented in the world. Although the health contingency is fallaciously used as an argument, in reality there are two reasons for this unjustifiable outrage,” reports reve.

“The first is the low operating costs of renewable power plants (solar and wind) – their zero marginal cost – which is why they are dispatched as a priority and economically exclude fossil fuel CFE plants. In the context of a sharp drop in electricity demand due to the economic collapse, the government wants to avoid competition. It aims to put into operation obsolete, inefficient and polluting fuel oil plants, under the pretext of stability of the electrical system in terms of voltage and frequency, accusing renewables of intermittency. In Mexico, renewables contribute 6 -7% of total energy generation. In Germany, Denmark, Italy, California, Texas, and in several Chinese provinces and in many other countries, the penetration of renewables ranges from 15 to 30% without affecting the stability of the electrical system. The entry of fuel oil plants instead of renewables will severely impact costs, including the CFE itself (Basic Supply). We are all going to pay for it through higher taxes and electricity rates.”

Read the article.

“Hydrogen is gaining increasing prominence as a key element in the future global energy mix. In a recent report published by a coalition of 19 major oil and gas, automotive, fuel cell and hydrogen companies (including Chevron, Shell, Engie, Hyundai, Microsoft, Toyota and Daimler AG), hydrogen is considered to have the potential to generate US$140 billion per year of revenue in the United States alone by 2030 along with 700,000 jobs, rising to US$750 billion per year and 3,400,000 jobs by 2050,” report Michael Joyce and Euan Strachan in Akin Gump’s AG Speaking Energy.

“The report states that a number of key factors make the U.S. well positioned to establish itself as a leading player in the hydrogen economy including:

• Low-cost primary energy sources required for the production of low-carbon hydrogen and, in addition, an abundance of low-cost natural gas and carbon storage capacity for hydrogen produced via natural gas reforming with carbon capture and storage.
• The existence of well-established industry leaders in the U.S. capable of building the necessary scale to drive a hydrogen economy.
• Hydrogen is a strong low-carbon alternative in the U.S. transport sector.”

Read the article.

“Bureau of Land Management (BLM) has drafted two separate Interim Guidance statements to help alleviate some of the industry’s and BLM’ hardships created by the coronavirus 2019 (COVID-19) pandemic and dramatic collapse of oil prices. The final guidance should be issued by the end of the week,” writes Angela Franklin in Holland & Hart’s Legal Insights.

The article provides interim guidance for the following areas:

• Lease Suspension Requests During the COVID-19 National Emergency
• Royalty Rate Reduction Requests for Oil and Gas Leases during the COVID-19 national emergency

Read the article.

“During the months that Virginia state Sen. Jennifer McClellan worked to pass a groundbreaking clean energy law, she liked to say that the process was like trying to land a plane that was on fire,” writes Dan Gearino in Inside Climates News’ News Section.

“Then, when it passed, she found a new metaphor: It was like landing on the moon.”

“The bill, which Gov. Ralph Northam signed on Sunday, makes Virginia the latest state to require a transition to 100 percent carbon-free or renewable energy, and the first in the South. This club now includes five other states—California, Hawaii, New Mexico, New York and Washington—plus Puerto Rico and Washington, D.C.”

“Also, Maine and Nevada have enacted laws that set goals—as opposed to requirements—for 100 percent clean energy.”

Read the article.

“The Organization of the Petroleum Exporting Countries (“OPEC”) and other countries including Russia may have reached a tentative agreement during its virtual meeting today to temporarily cut a significant volume of production; however, at the last-minute, Mexico did not approve the deal,” reports Melissa J. Lyon in The National Law Review.

“According to The New York Times article entitled, OPEC and Russia Reach a Deal to Cut Oil Production: Live Updates, OPEC and other oil-producing countries reportedly agreed to cut about 10 million barrels a day, or about 10 percent from normal production levels, in May and June, and hope that more cuts can be agreed to tomorrow.  However, Mexico is currently reluctant to join in the deal.”

Read the article.

Charles Sartain, in Gray Reed’s Energy & the Law, continues the discussion “of the Texas Supreme Court’s opinion in Piranha Partners et al. v. Joe B. Neuhoff et al. determining that an assignment of an overriding royalty in minerals unambiguously conveyed the override in production under an entire lease.  The Court concluded that circumstances surrounding the transaction didn’t matter.”

“Piranha purchased Neuhoff’s interest through an oil and gas clearinghouse auction involving 1,200 properties located in 14 states. There was no negotiation between parties and the winning bidders typically acquired interests as-is, where-is, and without warranty of title. To enter its interests at the auction Neuhoff agreed to various provisions.”

Read the article.

“Across the country, dozens of cities and states have passed laws or resolutions targeting 100 percent carbon-free electricity — most recently 20 communities in Utah and the state of Virginia,” reports David Roberts in Vox’s Energy & Environment.

“But is it even possible to power a modern economy with a carbon-free grid? And if so, what are the best energy sources and technologies for getting there?”

“Now there is a growing list of jurisdictions that face stringent emissions targets in years ahead and urgently need to figure out answers. We’ll discuss the most notable such jurisdiction, California, and a cool new(ish) technology that it may help it reach its 100 percent target, in a moment.”

Read the article.

“Both the United States Environmental Protection Agency (EPA) and plaintiff’s lawyers have been targeting the chemical ethylene oxide in recent months,” discusses Peter C. Condron, Andrew D. Kaplan and Bryon R. Brown in Crowell Moring’s Alerts & Newsletters.

“In December 2019, EPA published an advance notice of proposed rulemaking to gather information about the use of ethylene oxide in commercial sterilization and fumigation businesses for future Clean Air Act regulations. One week later, EPA published a proposed rule under the Clean Air Act that would seek to reduce emissions of ethylene oxide from storage tanks, process vents and equipment leaks at manufacturing facilities. These actions followed on the heels of two class action lawsuits filed in a West Virginia federal court on behalf of individuals who lived in the vicinity of two different facilities that manufactured ethylene oxide and, according to the complaint, emitted the chemical into the environment, allegedly causing harm to the plaintiffs. These actions may lead to additional interest in ethylene oxide among plaintiff’s lawyers and state regulators.”

Read the article.

“In Chalker Energy Partners III LLC v. LeNorman Operating LLC, the Texas Supreme Court reaffirmed its belief in the sanctity of the written contract and the freedom of parties to negotiate and agree to contracts as they desire,” reports Charles Sartain in Gray Reed’s Energy and the Law.

“Chalker and other sellers wanted to sell leases in several Panhandle counties. LeNorman signed a Confidentiality  Agreement, which had a provision entitled ‘No Obligation’,  … unless and until a definitive agreement has been executed and delivered, no contract … providing for a transaction … shall be deemed to exist and neither Party will be under any legal obligation of any kind whatsoever with respect to  such transaction … ”

“After a bidding war between LeNorman and Jones Energy, the Sellers declined to sell and LeNorman elected not to pursue the transaction. Then, after the bidding deadline the Sellers offered to sell 67 percent of the assets, LeNorman emailed what it termed a “counter-proposal”, setting a deadline and adding that it would not be modifying or accepting any changes. Sellers’ representative emailed an acceptance before the deadline, subject to a “mutual agreeable Purchase and Sale Agreement”, sent LeNorman a revised draft PSA, and took off for Thanksgiving. LeNorman sent a redlined PSA for consideration.  During that time Jones made another offer that was accepted and Jones acquired the assets.”

Read the article.

“The IRS has issued much-awaited guidance regarding the Section 45Q credit,” reports David B. Blair, David J. Fischer, Teresa Abney and Eleanor Moran McWaters in Crowell Moring’s Alerts & Newsletters.

“In Revenue Procedure 2020-12, the IRS provided a safe harbor under which the IRS will treat partnerships as properly allocating the Section 45Q credit to investor-partners. In Notice 2020-12, the IRS issued guidance and safe harbors on the beginning of construction under Section 45Q, which permits credits only for projects for which construction begins before January 1, 2024. Taxpayers await proposed regulations on Section 45Q, which are expected to cover technical issues such as recapture and alternatives for secure geological storage.”

They discuss Section 45Q Background, Revenue Procedure 2020-12 and Notice 2020-12 in detail.

Read the article.

“Over the past decade, the Texas Supreme Court has attempted to define and clarify exactly what duty is owed by an oil and gas executive right holder (the “executive”) to the non-participating interest holders who are along for the ride, collecting royalty payments but having little to no ability to control how they are generated. While the executive right holder does not owe a fiduciary duty to non-participating royalty interest (“NPRI”) holders (those royalty holders who do not share in bonus or rental payments and who also do not have the right to execute leases), it is clear that a certain level of consideration is required, and the failure to do so may be costly,” explains Ted R. Harrington in Carrington Coleman’s Published.

“The first substantial step the Texas Supreme Court took towards pinning a duty on executives came in 2011, in Lesley v. Veterans Land Bd. of State. The Court in this case dealt with an executive’s inaction, or refusal to lease, and stopped short of producing a bright-line test for holding executives accountable. Instead, it toed the line and put forth the idea that if the executive’s refusal to lease was “arbitrary or motivated by self-interest, the executive may have breached his duty.”

“Four years later, the Court in KCM Fin. LLC v. Bradshaw again examined the discretion an executive has concerning the right to lease. This time, the Court was faced with an executive’s affirmative action, leasing to a third party at a sub-market rate (the rental payments being received by the executive and NPRI holders in their respective proportions), in exchange for an above-market bonus payment (received only by the executive right holder). ”

Read the article.

“On February 10, 2020, FERC filed its Rehearing En Banc Brief regarding opposition to FERC’s authorization of the construction of Transcontinental Gas Pipe Line Company, LLC’s  proposed Atlantic Sunrise Project — an interstate pipeline designed to supply enough natural gas to meet the daily needs of more than 7 million American homes. The United States Court of Appeals for the District of Columbia issued an opinion on August 2, 2019, upholding FERC’s decision to conditionally approve the Project. However, on September 16, 2019, Hilltop Hollow Limited Partnership, Hilltop Hollow Limited Partnership, LLC, and Stephen D. Hoffman petitioned the court for rehearing of the court’s opinion en banc. The Petitioner’s main challenge was FERC’s usage of tolling orders, which allows FERC to delay rehearing after granting a pipeline certificate, as impermissible under the Natural Gas Act and the Due Process Clause of the Fifth Amendment. The court granted that petition and vacated the underlying judgment in a December 5, 2019 order,” write Miriam Archibong and Miles Kiger in the Washington Energy Report’s Natural Gas.

Read the article.

“The U.S. Government, through the Department of Energy (DOE), regulates the energy efficiency of consumer products and industrial equipment that consume electricity. There are now more than 50 broad categories of products that are subject to regulation, including things such as lightbulbs, air conditioners, televisions, and kitchen appliances, as well as commercial heating and cooling equipment, refrigeration equipment, electric motors, and industrial fans. The requirements are different for every regulated product, and by law, DOE must consider whether to impose more stringent efficiency standards for every product every six years.” writes Mary Anne Sullivan of Hogan Lovells in Lexology.

“There are many ways to violate the regulations. In addition to selling products that do not meet the required efficiency standards,” the article provides a list of other activities that constitute violations.

Read the article

“Attorneys sparred Friday over oil and gas drilling in Alaska – whether the government ignored environmental consequences and if it should reevaluate projects in light of climate science released after the project was first evaluated in 2012.” reports Karina Brown in Courthouse News Service.

“The National Petroleum Reserve-Alaska is 23.4 million acres of pristine wilderness named as a source of oil for the U.S. Navy in 1923. The vast area is important habitat for millions of migratory birds, marine mammals like beluga whales and home to the Teshekpuk Lake caribou herd – critical for Nuiqsut subsistence hunters. Congress handed management to the Department of the Interior in 1976 with the mandate to provide “maximum protection” to the area’s fish and wildlife habitat.”

“In 2016, ConocoPhillips Alaska found a new cache of oil in the reserve that would mean an additional 130,000 barrels per day – beyond the daily 500,000 barrels that flowed through TransAlaska Pipeline last year.”

Read the article.

“Can targeted advertising establish general jurisdiction over a foreign corporation?  The Fifth Circuit had not addressed this issue until Frank v. P N K (Lake Charles) L.L.C.  But in so doing, the court may have announced a new jurisdictional test with significant ramifications for future cases.” addresses Philip Dore & Cristian Soler in LexBlog’s Energy.

“Frank was a wrongful-death lawsuit filed in Texas state court against L’Auberge Hotel & Casino and its marketing division, PNK.  Following removal to federal court, the district court granted PNK’s motion to transfer, finding PNK was not subject to general jurisdiction in Texas.  The plaintiffs appealed.”

“The Fifth Circuit began by charting the Supreme Court’s general-jurisdiction decisions in Goodyear, Daimler, and BNSY.  For a corporation, the question is whether its “affiliations with the State are so continuous and systematic as to render it essentially at home in the forum State.”  A corporation is generally considered “at home” only in its state(s) of incorporation and principal place of business.  For PNK, this was Louisiana.  So, the question on appeal was whether this was the “exceptional case” where personal jurisdiction could also be exercised in another state.”

Read the article.

“Exxon Mobil dodged a bullet last month when a judge rejected a novel climate-change lawsuit brought by New York’s attorney general. The case began with a promise from state officials that there would be a historic reckoning for the fossil fuel giant.” reports Erik Larson in the San Francisco Chronicle.

“It ended ignominiously as a failed accounting fraud claim.”

“Globally, humans are on the hook for trillions of dollars if they want to sufficiently reduce greenhouse gas emissions, acclimate to the damage already done and prepare for what is yet to come. As more governments and taxpayers find themselves staring down the barrel at rising climate costs, they are increasingly turning to the courts to hold Big Oil accountable.”

“Federal appeals courts on both sides of the country are considering whether such cases may proceed. Their rulings-one of which may come any day-will have a powerful effect on the future of climate change litigation.”

Read the San Francisco Chronicle’s article.

Gray Reed partner Charles Sartain takes a look back at some of 2019’s malefactors in the energy business in a post in the firm’s Energy & the Law blog.

“To our bad guys, 2019 was a year flush with hope and opportunity; it ended with recidivism, more misery from Venezuela, a charlatan, an Okie who pulled a multi-million dollar fast-one on Chesapeake and, as in years past, a peek into the darker side of the human condition,” he writes.

The post describes six cases of fraud, conspiracy, money laundering, and outright theft.

Read the article.