Third Circuit Decision Impacts Perfection of Security Interests in Sales of Crude Oil

Posted in Oil & Gas

A recent court decision has reinforced the need to adequately document transactions for the physical sale of crude oil.  In Arrow Oil & Gas, Inc., et al. v. J. Aron & Company, et al. (In re Semcrude, L.P., et al.), Case Nos. 15-3094, 15-3095, 15-3096 and 15-3097 (3d Cir. July 19, 2017), the United States Court of Appeals for the Third Circuit held that producers that want to perfect a security interest in crude oil which they sell to an out of state buyer must file a financing statement in the state where the buyer is located.  Producers that have not filed such a financing statement do not have a perfected security interest in such crude oil.

This case stems from the sale of crude oil by a collection of upstream producer that sold crude oil on credit to Semgroup L.P and its affiliates (Semgroup). The crude oil was sold to Semgroup with Semgroup responsible for paying for the crude oil on the 20th day of the month following the sale. Semgroup in turn sold the crude oil to J. Aron and BP. Semgroup represented in its sales to J. Aron and BP that the crude oil was “free from all royalties, liens and encumbrances.” J. Aron and BP were responsible for paying for the crude oil on the 20th day of the month following the sale.

Continue Reading.

Office of Fossil Energy of the Department of Energy Issues Notice of Proposed Rulemaking That Will Automatically Authorize Certain Applications To Export Small Volumes of Natural Gas

Posted in Energy, FERC

On Sept. 1, the Office of Fossil Energy of the Department of Energy (DOE/FE) issued a notice inviting public comment on a proposal which, if adopted, will authorize automatically applications to export small volumes of natural gas to non-Free Trade Agreement nations.  82 Fed. Reg. 41,570 (Notice).  As DOE/FE describes its proposal:

[T]he proposed rule provides that DOE, upon receipt of any complete application to export natural gas (including LNG) to non-FTA countries, will grant the application provided that it satisfies the following two criteria:  (1) The application proposes to export natural gas in a volume up to and including 0.14 Bcf/d; and (2) DOE’s approval of the application does not require an EIS or EA under NEPA—that is, the application is eligible for a categorical exclusion under DOE’s NEPA regulations.

82 Fed. Reg. at 41,572-73.  DOE/FE will not issue notice of nor receive public comment on any such application.

In its Notice, DOE/FE noted the development of a “small-scale export market” consisting chiefly of South American, Central American, and Caribbean nations.  While there is a demand in this market for American-produced natural gas, this demand is not sufficient to support exports from large-scale LNG terminals using conventional LNG tankers.  According to DOE/FE, the participants involved in this market typically view “small-scale” to be exports of less than 1.0 million metric tons per annum.  This computes to the 0.14 Bcf per day chosen by DOE/FE as the cutoff.  In support of its conclusion that these “small-scale” exports are in the public interest and may be automatically authorized, DOE/FE referred to a series of studies that the agency has commissioned since 2011 which show generally that increased exports of natural gas will likely generate economic benefits for the United States (e.g., job creation, enhanced tax revenues, and improved balance of trade) and that domestic supplies will be adequate to meet increased domestic demand and increased exports.  Further, increased exports into this small-scale market will enable electric generation to move from diesel and heavy fuel oil to natural gas with reduced GHG emissions and possible stronger demand for American-origin generating equipment.

Comments on DOE/FE’s proposal are due on Oct. 16.  Note also that DOE/FE’s proposal does not address whether the facilities involved in small-scale LNG projects are within the jurisdiction of the Federal Energy Regulatory Commission (FERC) and require FERC approval, which involves a separate, fact-specific analysis.

The UK’s Position Paper on the Post-Brexit Availability of Goods – Implications for Chemicals

Posted in Brexit, Chemicals, EU

The UK government has recently published a series of position papers outlining its thinking on a range of potential issues resulting from the June 2016 Brexit vote. The papers cover matters such as dispute resolution, cross-border arrangements on the Irish island, the treatment of European Union citizens, and data protection.

The EU’s Brexit negotiating team and many of the other EU member states have reacted to the publication of these papers with some scepticism. Nonetheless, the papers provide insight into the opening negotiating positions that the UK may adopt when the substantive terms of the UK’s future relationship with the EU comes to be discussed. Such discussions are currently timetabled for October, but only if sufficient progress is deemed by the EU to have been made in the ongoing round of preliminary talks. Currently, there are indications that this October deadline will be missed.

Continue Reading.

The Death of Public Citizen in Pipeline NEPA Analyses: Was it Ever Alive?

Posted in Court Cases, Energy, NEPA

Last week we examined the Sierra Club v. Federal Energy Regulatory Commission decision from the D.C. Circuit holding that natural gas pipeline NEPA review must consider greenhouse gas emissions impacts from power plants served by the proposed pipeline. This week, we review the decision and its impact on pipeline projects:

In August, the U.S. Court of Appeals for the D.C. Circuit issued opinions in two appeals filed by the Sierra Club that address an agency’s obligation under the National Environmental Policy Act (NEPA) to consider the indirect environmental effects upstream or downstream of a proposed Federal action.  In the first case, Sierra Club v. U. S. Department of Energy, No. 15-1489 (D.C. Cir. Aug. 15, 2017) (Sierra Club (FLNG)), the Court held in a unanimous 3-0 opinion that in approving liquefied natural gas (LNG) exports, the Department of Energy (DOE) was not required to quantify the indirect effects of upstream “export-induced” gas production or the effect on downstream emissions resulting from changes in fuel sources.  In Sierra Club v. Federal Energy Regulatory Commission, No. 16-1329 (D.C. Cir. Aug. 22, 2017) (Sierra Club (Sabal Trail)), the Court held in a 2-1 decision that FERC was required to quantify the downstream emissions created by power plants to be served by a proposed pipeline.

Continue Reading…

D.C. Circuit Holds FERC Natural Gas Pipeline NEPA Review Must Consider Greenhouse Gas Emissions Impacts from Power Plants Served by Proposed Pipeline

Posted in Energy, FERC, Greenhouse Gas, GT Alert

Although there has been a significant shift with regard to climate change policy with the change of administrations, a recent decision at the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) makes clear that the National Environmental Policy Act or NEPA, enacted in 1970, remains an important weapon for those who seek to ensure that the climate change impacts of major federal actions are considered.  On Aug. 22, 2017, the D.C. Circuit held that the Federal Energy Regulatory Commission (FERC) failed to fully examine greenhouse gas impacts related to a pipeline project because the agency’s Environmental Impact Statement (EIS) for the project failed to consider the impacts from greenhouse gas emissions from the power plants to be served by the proposed pipeline.

Continue Reading.

What You Need to Know About the Superfund Task Force’s Recommendations

Posted in CERCLA, EPA, Superfund

There are over 1,300 sites listed on the Environmental Protection Agency’s National Priorities List of contaminated sites that require cleanup, over a hundred of which are located in Pennsylvania. In May, EPA Administrator Scott Pruitt promised to get “hands-on” with the Superfund program in order to expedite the cleanup of contaminated sites around the country, with a focus on those NPL sites. As part of Pruitt’s strategy, he established a task force to provide recommendations on how to “restructure the cleanup process, realign incentives of all involved parties to remediate sites, encourage private investment in cleanups and sites and promote the revitalization of properties across the country.”

On July 25, Pruitt announced the task force’s recommendations. The 42 recommendations are wide-ranging and invite additional follow-up in many instances in the form of guidance and policy documents and the establishment of additional task groups. While the additional detail leaves us guessing for the moment on how Pruitt will execute many of these recommendations, several key themes emerge from the document.

Read more from my article in The Legal Intelligencer supplement, PA Law Weekly, by clicking here.

Safe Drinking Water Act Does Not Preempt Flint Plaintiffs’ Section 1983 Claims

Posted in Contamination, Court Cases, Michigan, Water

On July 28, 2017 the Sixth Circuit Court of Appeals reversed two lower court rulings and remanded two cases pertaining to the lead-contaminated water crisis in Flint, Michigan, concluding that plaintiffs’ claims under 42 U.S.C. § 1983 for deprivation of their federal rights were not preempted by the Safe Drinking Water Act (SDWA) (Beatrice Boler, et al. v. Darnell Earley, et al., No. 16-1684 and Melissa Mays, et al. v. Rick Snyder, et al., No. 17-1144, 6th Cir., 2017 U.S. App. LEXIS 13691).

Plaintiffs, residents of Flint affected by contaminated city water, brought suit against various state and local officials and entities, alleging violation of their constitutional rights, pursuant to 42 U.S.C. § 1983, along with other claims. In Boler, the district court determined that the Plaintiffs’ § 1983 claims were preempted by the Safe Drinking Water Act (SDWA) and dismissed the case for lack of subject matter jurisdiction. Relying on its preemption analysis in Boler, the district court also dismissed the Mays case. The two cases were consolidated on appeal.

Plaintiffs allege that the defendants, who are all employees of the state of Michigan or the city of Flint, were acting under the color of law and “deliberately deprived” the class of the rights and guarantees secured by the 14th Amendment to the U.S. Constitution, in that they “deprived plaintiffs of life, liberty and property without due process of law when they took” safe drinking water and replaced it with “what they knew to be a highly toxic alternative solely for fiscal purposes.” Specifically, the plaintiffs alleged that the water provided from the Flint River contained high levels of lead.

On appeal, plaintiffs argued that the district court misapplied the standard enunciated by the Supreme Court in a line of cases that concluded with Fitzgerald v. Barnstable School Committee, 555 U.S. 246, 252 (2009). In Fitzgerald, the Court explained the distinction between § 1983 claims premised on constitutional violations and those based on statutory violations in determining whether a § 1983 claim is precluded. “In those cases in which the § 1983 claim is based on a statutory right, evidence of such congressional intent may be found directly in the statute creating the right, or inferred from the statute’s creation of a comprehensive enforcement scheme that is incompatible with individual enforcement under § 1983.” Fitzgerald, 555 U.S. at 252. The Court in Fitzgerald then explained:

In cases in which the § 1983 claim alleges a constitutional violation, lack of congressional intent may be inferred from a comparison of the rights and protections of the statute and those existing under the Constitution. Where the contours of such rights and protections diverge in significant ways, it is not likely that Congress intended to displace § 1983 suits enforcing constitutional rights. Our conclusions regarding congressional intent can be confirmed by a statute’s context.

Id. at 252–53 (quotation marks and citations omitted).

In determining whether plaintiffs’ claims were preempted by the SDWA, the Sixth Circuit adhered closely to the framework set out in Fitzgerald. Accordingly, the Court began its analysis by finding that there is no clear inference from either the text of the statute or its legislative history that Congress intended for the SDWA’s remedial scheme to displace § 1983 suits enforcing constitutional rights. According to the Court, this in turn “informs our next step – evaluating the comprehensiveness of the remedial scheme provided by the statute.”  Op at 14.

Turning to the remedial scheme set out in the SDWA, the Sixth Circuit found that “the remedial schemes in the SDWA are not so comprehensive as to demonstrate congressional intent to preclude remedies under § 1983 for constitutional violations.” Op. at 17 The Court said: “The SDWA’s remedies are more limited than those generally available under § 1983, as the statute provides for injunctive relief only, not for recovery of damages or other monetary relief available to Plaintiffs with successful § 1983 claims. Though the statute contains a private right of action, it also includes a savings clause establishing that its private action does not restrict rights a person may exercise outside the SDWA. The availability of a private judicial remedy in the SDWA, moreover, does not conclusively establish congressional intent to preclude relief under § 1983.”  Op at 16.

This left the Court with the last consideration set out in Fitzgerald – a comparison of the substantive rights and protections of the SDWA to the protections provided by the relevant constitutional provisions. The Court concluded that there is no textual indication in the SDWA that Congress expressly chose to preempt § 1983 claims and that the provisions of the remedial scheme do not demonstrate such an intention. Accordingly, the Court found that the contours of the rights and protections found in the constitutional claims diverge from those provided by the SDWA such that it inferred a lack of congressional intention to foreclose § 1983 claims.

As a result, the Court found that the SDWA did not preclude plaintiffs § 1983 claims and reversed the district court’s dismissal of their Complaints on that basis.

The European Union (Withdrawal) Bill – Implications for Environmental Law

Posted in Brexit, Chemicals, EU

On 13 July 2017 the European Union (Withdrawal) Bill (the Bill) was presented to the United Kingdom Parliament for its initial reading. This draft legislation, previously referred to as the “Great Repeal Bill“, is intended to give substantive effect to the UK’s 23 June 2016 Brexit vote by, when enacted, repealing the European Communities Act 1972 through which the UK became a member of the European Union.

The Bill will also convert, for legal continuity, existing EU law into domestic UK law. Following the UK’s exit from the EU – expected to be in March 2019 – the UK Parliament will then have the ability to amend such converted EU law as it sees fit (subject of course to the UK’s other international legal obligations, including any exit agreement reached with the EU). The Bill will therefore bring to an end the supremacy of EU law in the UK.

Continue Reading.

The Margate Dune Project, Cooperative Federalism, and Problems of Litigation Procedure

Posted in Climate Change, Court Cases, DEP, Environment, Executive Order, Federal, Infrastructure, Litigation, New Jersey, State & Local

The current federal administration has expressed a desire to defer largely to states through principles of cooperative federalism.  A recent case involving the dune construction in Margate, New Jersey, offers some insight into the procedural complexities this approach presents for those affected.  Where a state oversees a federally funded project, it is unlikely that one court can hear all of the issues.  Margate demonstrates parties may need to seek to enjoin the state actor in state court while proceeding against the federal actor in federal court.  Other less publicized examples include instances where a party has entered into a consent decree with a federal agency, but then a state agency issues a permit.

The U.S. Army Corps of Engineers (“Corps”) has been constructing dunes to protect Absecon Island, where Margate is located, from storm damage, a project motivated by Superstorm Sandy.  Storm water from Margate streets has been reported to have ponded behind the dunes and does not percolate into the sand promptly.  The City has sued to halt the project.

To have jurisdiction over the New Jersey Department of Environmental Protection (“NJDEP”), which had gained an easement to construct the federally funded project, Margate had to bring its suit in state court.  City of Margate v. N.J. Dep’t of Envtl. Protection, No. ATL-C-52-17 (N.J. Super. Ct. Ch. Div., Atlantic Cnty.).  After an initial hearing, the New Jersey Superior Court issued an order temporarily enjoining NJDEP and the contractor hired by the Corps from completing further construction.  The Corps was not yet a party and did not participate in the hearing.  The state court ordered the Corps joined as an indispensable party, and the Corps, in turn, removed the action to federal court.

The Corps asked the District of New Jersey to dissolve the temporary restraints, in part, on the basis that the state court did not have jurisdiction to enjoin the Corps.  City of Margate v. N.J. Dep’t of Envtl. Protection, No. 17-cv-5766 (D.N.J. Aug. 10, 2017).  At the same time, NJDEP asserted sovereign immunity under the Eleventh Amendment and has not consented to federal court jurisdiction.  The district court noted that to the extent the Corps consents to be sued, the “federal courts have exclusive jurisdiction,” which means, the Corps cannot consent to jurisdiction before the state court.  While NJDEP’s sovereign immunity is a “personal privilege” that can be waived voluntarily “at pleasure,” NJDEP has declined to waive its sovereign immunity.  That means, the federal court has jurisdiction over the Corps, but not NJDEP, and the state court has jurisdiction over NJDEP, but not the Corps.  As a result, Margate has filed another action against NJDEP in state court.

On Tuesday, the Third Circuit denied the City of Margate’s motion to stay the district court’s order denying the City’s request for an injunction and dissolving temporary restraints on the Corps’ dune project.  City of Margate v. N.J. Dep’t of Envtl. Protection, No. 17-2752 (3d Cir. Aug. 15, 2017).  The Third Circuit referred the question of whether the district court’s order is immediately appealable to a full motions panel.  That leaves the two sovereigns in separate lawsuits in separate courts at least for the rest of this summer season and suggests that those affected by state-federal “cooperatively federalist” projects may face a similar procedural problem.

Coincidentally, section 6 of the August 15 Presidential Executive Order on environmental review of infrastructure projects, available here, revokes President Obama’s Executive Order 13690, which called for evaluations of flood resiliency of infrastructure projects taking climate change into account.

What’s Happening With the Environmental Rights Amendment?

Posted in Environmental Rights Amendment, Pennsylvania

A decision rendered last month by the Supreme Court of Pennsylvania reinterpreted the commonwealth’s obligations under Article I, Section 27 of the Pennsylvania Constitution, known as the Environmental Rights Amendment (ERA). The Supreme Court sided with the appellant, Pennsylvania Environmental Defense Foundation (PEDF), in PEDF v. Commonwealth of Pennsylvani a, 10 MAP 2015, and held that the commonwealth had violated the fiduciary duty imposed on it by the ERA. Pursuant to this decision, Pennsylvania and its agencies must prohibit the degradation of public natural resources resulting from state or private activity, and must act affirmatively by passing legislation intended to protect the environment. These duties do not, however, prohibit outright the commonwealth from utilizing its public property in ways that promote the general welfare of its citizens. Included in the commonwealth’s fiduciary duty is the duty of prudence, requiring it to “exercise such care and skill as a man of ordinary prudence would exercise in dealing with his own property.” This duty tempers—somewhat unclearly—an interpretation of the ERA requiring preservation of Pennsylvania’s public natural resources to the exclusion of their reasonable use.

Read more from my article in The Legal Intelligencer supplement, PA Law Weekly, by clicking here.