Articles Posted in Energy, Oil & Gas Law

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The power companies allege that they were overcharged for electricity during several months in 2000–2001 and sought to recover the overcharges from the federal government based on sales by the federal Western Area Power Administration (WAPA) and Bonneville Power Administration (BPA). The California Power Exchange (Cal-PX) and the California Independent System Operator (Cal-ISO) were responsible for acquiring and distributing electricity between producers and consumers in California and setting prices for the electricity. The power companies argued that a contract existed between all consumers of electricity (including themselves) and all producers of electricity (including the government agencies) in California. The government argued that the contracts were only between the middleman entities—Cal-PX and Cal-ISO—and the consumers and producers individually. The Claims Court dismissed for lack of standing. The Federal Circuit affirmed. The companies lack privity of contract or any other relationship with the government that would confer standing. Under the Tucker Act, the Claims Court has jurisdiction over contract cases in which the government is a party, 28 U.S.C. 1491(a)(1); normally a contract between the plaintiff and the government is required to establish standing. The court noted that the companies may have claims against the parties with whom they are in contractual privity, the electricity exchanges. View "Pacific Gas & Elec. Co. v. United States" on Justia Law

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Netzer owns the 496 patent, entitled “Process for the Coproduction of Benzene from Refinery Sources and Ethylene by Steam Cracking,” which describes a process for the coproduction of ethylene and purified benzene from refinery mixtures. The district court entered summary judgment of noninfringement. The court did not formally construe the claims, but, implicitly agreed with defendant (Shell) that “fractionating” does not include extraction. The court found no literal infringement, reasoning that “Netzer’s method does not include extraction and does not yield benzene of 99.9% purity” and that “[t]o infringe, Shell would have to eliminate the extraction step and still produce benzene purified to at least 80%.” The court also found no infringement under the doctrine of equivalents because Netzer is barred by “specific exclusion, prosecution-history estoppel, and prior art.” The Federal Circuit affirmed; no reasonable jury would find that the accused process performs substantially the same function in substantially the same way to obtain substantially the same result. View "David Netzer Consulting, LLC v. Shell Oil Co." on Justia Law

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Under the 1887 General Allotment Act and the 1934 Indian Reorganization Act, the U.S. is the trustee of Indian allotment land. A 1996 class action, filed on behalf of 300,000 Native Americans, alleged that the government had mismanaged their Individual Indian Money accounts by failing to account for billions of dollars from leases for oil extractions and logging. The litigation’s 2011 settlement provided for “historical accounting claims,” tied to that mismanagement, and “land administration claims” for individuals that held, on September 30, 2009, an ownership interest in land held in trust or restricted status, claiming breach of trust and fiduciary mismanagement of land, oil, natural gas, mineral, timber, grazing, water and other resources. Members of the land administration class who failed to opt out were deemed to have waived any claims within the scope of the settlement. The Claims Resolution Act of 2010 ratified the settlement and funded it with $3.4 billion, The court provided notice, including of the opt-out right. Challenges to the opt-out and notice provisions were rejected. Indian allotees with interests in the North Dakota Fort Berthold Reservation, located on the Bakken Oil Shale (contiguous deposits of oil and natural gas), cannot lease their oil-and-gas interests unless the Secretary approves the lease as “in the best interest of the Indian owners,” 122 Stat. 620 (1998). In 2013, allotees sued, alleging that, in 2006-2009, a company obtained Fort Berthold allotment leases at below-market rates, then resold them for a profit of $900 million. The Federal Circuit affirmed summary judgment for the government, holding that the allotees had forfeited their claims by failing to opt out of the earlier settlement. View "Two Shields v. United States" on Justia Law

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The Nuclear Waste Policy Act of 1982 authorized the Department of Energy (DOE) to contract with power utilities for a planned national nuclear waste disposal system, 42 U.S.C. 10222. Utilities were to pay into a Nuclear Waste Fund; the government was to dispose of their spent nuclear fuel beginning by January 31, 1998.. Under the Standard Contract, utilities must provide “preparation, packaging, required inspections, and loading activities necessary for the transportation … to the DOE facility.” DOE is responsible for “arrang[ing] for, and provid[ing], a cask(s) and all necessary transportation … to the DOE facility.” In 1983, System Fuels entered Standard Contracts concerning the Grand Gulf and Arkansas Nuclear One power stations. The government has yet to begin accepting spent nuclear fuel. System Fuels obtained damages for costs incurred through August 31, 2005 (Grand) and June 30, 2006 (Arkansas), including costs to construct Independent Spent Fuel Storage Installations (ISFSIs) and later successfully sought damages for continued breach. The Claims Court denied costs incurred to load spent fuel into storage casks at the ISFSIs by first loading it into canisters, then loading those canisters into dry fuel storage casks and welding the casks closed. The Federal Circuit reversed, noting that under the Standard Contracts, DOE cannot accept any of the canistered fuel as is, so System Fuels will incur costs to unload the casks and canisters and to reload fuel into transportation casks if and when DOE performs. View "System Fuels, Inc. v. United States" on Justia Law

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The Department of Commerce determined that utility scale wind towers from the People’s Republic of China and utility scale wind towers from the Socialist Republic of Vietnam (together, the subject merchandise) were sold in the United States at less than fair value and that it received countervailable subsidies. The International Trade Commission made a final affirmative determination of material injury to the domestic industry. The determination was by divided vote of the six-member Commission. The Court of International Trade upheld the Commission’s affirmative injury determination. Siemens Energy, Inc., an importer of utility scale wind towers, challenged the determination. The issues on appeal concerned the interpretation and effect of the divided vote. The Federal Circuit affirmed, holding that the Court of International Trade properly upheld the Commission’s affirmative injury determination. View "Simens Energy, Inc. v. United States, Wind Tower Trade Coalition" on Justia Law

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Trona is a sodium carbonate compound that is processed into soda ash or baking soda. Because oil and gas development posed a risk to the extraction of trona and trona worker safety, the Bureau of Land Management (BLM), which manages the leasing of federal public land for mineral development, indefinitely suspended all oil and gas leases in the mechanically mineable trona area (MMTA) of Wyoming. The area includes 26 pre-existing oil and gas leases owned by Barlow. Barlow filed suit, alleging that the BLM’s suspension of oil and gas leases constituted a taking of Barlow’s interests without just compensation and constituted a breach of both the express provisions of the leases and their implied covenants of good faith and fair dealing. The Federal Circuit affirmed the Claims Court’s dismissal of the contract claims on the merits and of the takings claim as unripe. BLM has not repudiated the contracts and Barlow did not establish that seeking a permit to drill would be futile. View "Barlow & Haun, Inc. v. United States" on Justia Law

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WesternGeco’s patents relate to technologies used to search for oil and gas beneath the ocean floor. Ships tow long streamers equipped with sensors. An airgun bounces sound waves off of the ocean floor. The sensors pick up the returning sound waves and create a map of the subsurface geology to aid in identifying drilling locations. The streamers can be miles long and can tangle or drift apart, resulting in distorted maps. The patents relate to controlling the streamers and sensors in relation to each other by using winged positioning devices and generating four-dimensional maps with which it is possible to see changes in the seabed over time. WesternGeco manufactures the Q-Marine, and performs surveys for oil companies. ION manufactures the DigiFIN, and sells to its customers, who perform surveys for oil companies. WesternGeco filed suit. A jury found infringement and no invalidity and awarded $93,400,000 in lost profits and $12,500,000 in reasonable royalties. The Federal Circuit affirmed, rejecting arguments that WesternGeco was not the owner of the patents and lacked standing and that the court applied an incorrect standard under 35 U.S.C. 271(f)(1). The court upheld denial of enhanced damages for willful infringement and reversed the award of lost profits resulting from conduct occurring abroad. View "WesternGeco L.L.C. v. Ion Geophysical Corp." on Justia Law

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In 1999-2000, AmerGen purchased three nuclear power plants. The Nuclear Regulatory Commission transferred the operating licenses, making AmerGen obligated to decommission the plants, and extended the licensing to 2029, 2034, and 2026. Decommissioning may take 60 years. Prior owners had established qualified and nonqualified trust funds to pay for decommissioning. Contributions to a qualified fund (I.R.C. 468A), subject to limitations, are currently deductible. Investment incomes are taxed at a fixed rate. A nonqualified fund does not have those tax advantages. AmerGen's accountants advised that it was unlikely that the IRS would allow AmerGen to include the assumed decommissioning liability in the basis of the assets acquired on the date of the purchase and that the entire cash consideration would be allocated to the basis of transferred nonqualified funds, rather than to the basis of the plants. AmerGen sought IRS private letter rulings and required the sellers to make additional contributions to the trusts. They transferred $393 million in qualified funds and $581 million in nonqualified funds. On its 2001-2003 tax returns, AmerGen claimed that, in addition to the $93 million purchase price, it assumed decommissioning liabilities of $2.15 billion that should be included in the basis of the plants at the time of purchase. With that adjustment and corresponding depreciation and amortization deductions and reduced capital gains, AmerGen attempted to reduce its taxable income by $110 million per year. The IRS rejected the request. The Federal Circuit affirmed summary judgment that the economic performance requirement of 26 U.S.C. 461(h) applies to AmerGen as an accrual basis taxpayer so that it may not include the liabilities in basis. AmerGen did not economically perform decommissioning in the relevant tax years. View "Amergen Energy Co, LLC v. United States" on Justia Law

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Lightning strikes and animal contacts can cause wires of the power grid to short. Such “low voltage events” can damage wind turbines, which previously disconnected from the grid during a low voltage event. As wind began providing a greater percentage of overall power, utilities began to require low voltage ride-through. GE’s 985 patent, directed to controlling components of a wind turbine that would allow it to remain connected to the grid and to safely ride through a low voltage event, names five co-inventors who were based in Germany. Wilkins is not named. Wilkins was involved in adapting wind turbines to meet certain requirements in the U.S. The German team consulted Wilkins for confirmation that their invention would work with U.S. grid. Wilkins left GE in 2002. The 985 patent is asserted by GE against Mitsubishi in several lawsuits. Mitsubishi challenged the validity of the patent and hired Wilkins, who worked 1,000 hours in an effort to invalidate the 985 patent. Mitsubishi also argued that the patent was unenforceable because GE intentionally failed to name Wilkins as a co-inventor. The administrative law judge found that Wilkins had co-invented the patent but that GE did not intend to deceive the PTO. Later, Wilkins asserted ownership rights in the 985 patent and another patent. Wilkins entered into additional agreements with Mitsubishi and was paid more than $1.5 million. GE sought to quiet title to the patents. Wilkins counterclaimed. After refusing to take an unqualified oath to tell the truth at his deposition, behavior that the court deemed “not acceptable,” Wilkins filed a declaration calling the court “ignorant.” The district court dismissed GE’s ownership claims as time-barred and held that Wilkins and Mitsubishi failed to establish that Wilkins co-invented any claim of the 985 patent. The Federal Circuit affirmed, noting that Wilkins had filed additional claims for malicious prosecution and abuse of process against GE and its counsel. View "Gen. Elec. Co. v. Wilkins" on Justia Law

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Following the 1941 attack on Pearl Harbor, each of the Oil Companies entered into contracts with the government to provide high-octane aviation gas (avgas) to fuel military aircraft. The production of avgas resulted in waste products such as spent alkylation acid and “acid sludge.” The Oil Companies contracted to have McColl, a former Shell engineer, dump the waste at property in Fullerton, California. More than 50 years later, California and the federal government obtained compensation from the Oil Companies under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. 9601, for the cost of cleaning up the McColl site. The Oil Companies sued, arguing the avgas contracts require the government to indemnify them for the CERCLA costs. The Court of Federal Claims granted summary judgment in favor of the government. The Federal Circuit reversed with respect to breach of contract liability and remanded. As a concession to the Oil Companies, the avgas contracts required the government to reimburse the Oil Companies for their “charges.” The court particularly noted the immense regulatory power the government had over natural resources during the war and the low profit margin on the avgas contracts. View "Shell Oil Co. v. United States" on Justia Law