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On March 17, 2023, the Texas Court of Appeals for the Third District issued an opinion reversing two winter storm Uri orders by the Public Utility Commission of Texas (PUCT) that had raised power prices in ERCOT to $9,000/MWh. ERCOT, the Electric Reliability Council of Texas, manages the electric grid for most, but not all, of Texas and serves approximately 26 million customers.

The decision by the Court of Appeals in Luminant Energy Company LLC v. Public Utility Commission of Texas, No. 03-21-00098-CV, has the potential to affect certain transactions made under the PUCT’s orders. The Court of Appeals not only reversed the PUCT’s orders but remanded them for further proceedings. Should the Court of Appeals’ opinion be upheld, it is unclear how the PUCT will resolve the pricing issues, but it would likely need to hold proceedings to address them. The opinion also raised questions about the authority of the PUCT to issue price caps for Texas’ energy market. …

Continue Reading PUCT Winter Storm Uri Orders Reversed and Remanded by Texas Court of Appeals

On Feb. 15, 2023, the U.S. District Court for the Northern District of Texas held that the force majeure provision contained in the parties’ contract applied to excuse performance even if the event — Winter Storm Uri — did not render performance impossible.

In MIECO LLC v. Pioneer Natural Resources USA, Inc., 2023 WL 2064723, the parties had entered into an agreement in which MIECO (Buyer) would purchase 20,000 million British thermal units of natural gas from Pioneer (Seller) each day from Nov. 1, 2020, to March 31, 2021. But from Feb. 14, 2021, to Feb. 19, 2021, Pioneer failed to deliver the full amount of the contracted natural gas due to Winter Strom Uri. On Feb. 16, 2021, Pioneer sent MIECO a notice of force majeure.…

Continue Reading Winter Storm Uri Qualifies as Force Majeure, Even When Performance Was Not “Impossible”

On Nov. 30, 2022, the Transportation Security Administration (TSA) published an advance notice of proposed rulemaking (ANPRM) aimed at enhancing cyber risk management in the pipeline and rail sectors. Indeed, the ANPRM recognizes the critical role pipelines and railroads play in ensuring economic and national security. But the ongoing and growing risk of cyberattacks increases…

On Jan. 18, 2023, a consumer advocacy group issued a letter urging the California Attorney General’s Office to initiate an investigation into rising natural gas prices in the state. If the group’s campaign gains traction, California could join New York as another sizable market investigating whether recent increases in energy prices might give rise to price gouging or other consumer protection-related liability for companies throughout the supply chain.…

Continue Reading Consumer Watchdog Calls on California AG to Investigate Rising Energy Prices

As of October 6, 2022, operators of gas and hazardous liquid pipelines must comply with the Pipeline and Hazardous Materials Safety Administration’s (“PHMSA”) Final Rule on “Valve Installation and Minimum Rupture Detection Standards.”[1]  The Rule codifies several related design and performance standards across 49 C.F.R. Parts 192 and 195.  Those standards largely apply to new or replacement onshore gas transmission pipelines.[2]  Now, however, the Rule impacts gas distribution pipeline operators in two significant ways.  First, the Rule requires operators to implement and maintain certain emergency notification requirements.[3]  Second, the Rule obligates operators to develop, implement, and incorporate “lessons learned” from a post-failure or incident review into their written procedures.[4]  Unfortunately for operators, the second requirement illustrates the growing challenge operators face in ensuring that internal investigations remain protected by the work-product privilege.…

Continue Reading New Federal Pipeline Safety Regulations Present Work-Product Concerns

Debtors in bankruptcy have broad authority to shed unfavorable contracts through the executory contract rejection process, subject to approval of the bankruptcy court. The Federal Energy Regulatory Commission (FERC), on the other hand, has exclusive jurisdiction over any request to modify or abrogate a “filed rate” under the Federal Power Act and the Natural Gas Act, which includes certain power purchase agreements and natural gas transportation contracts. For years, debtors and distressed counterparties faced uncertainty as to whether a bankruptcy court’s rejection order could fully relieve the debtor from performing under a filed-rate contract or if further relief from FERC (potentially applying the stringent “public interest” standard set out in the Mobile-Sierra line of cases) may be necessary to excuse future performance.
Continue Reading More Courts Reject FERC’s Jurisdictional Claims in Battle Over Rejection of Filed-Rate Contracts in Bankruptcy

On July 8, 2022, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a notice of regulatory enforcement discretion for particular gathering lines. Gathering lines are those pipelines that transport gas from a current production facility to a transmission line or main (see 49 C.F.R. § 192.3). The notice specifically applies to existing Type C gas gathering pipelines with an outer diameter greater than or equal to 8.625 inches, but less than or equal to 12.75 inches. It also applies only to violations of safety requirements identified in 49 C.F.R. § 192.9 until May 17, 2024.
Continue Reading PHMSA Issues Notice of Limited Enforcement Discretion for Some Gas Gathering Pipelines