MAY 2016
VOL. 16-5
PRATT’S ENERGY LAW REPORT
PRATT’S
ENERGY LAW
REPORT
EDITOR’S NOTE: CLEAN POWER UP IN
THE AIR
Steven A. Meyerowitz
THE LONG AND WINDING ROAD OF THE
CLEAN POWER PLAN LITIGATION
Jim W. Rubin and H. Alex Iliff
SENATE PASSES REAUTHORIZATION
BILL FOR PHMSA; HOUSE BEGINS
CONSIDERATION
Michael K. Friedberg and David C.
Whitestone
MAY 2016
YOU HAVE THE RIGHT TO REMAIN
CONCERNED: THE CLASH BETWEEN MSHA
SPECIAL INVESTIGATIONS AND CIVIL
PENALTY CASES
Robert Huston Beatty, Jr.
OREGON ENACTS PHASE-OUT OF “COAL
BY WIRE” AND DOUBLES RENEWABLE
PORTFOLIO STANDARD
Richard H. Allan
THE ARRIVAL OF THE BILLION DOLLAR OIL &
GAS BANKRUPTCY CASES
Douglas E. Deutsch
THE EUROPEAN COMMISSION APPROVES AN
ENERGY SECURITY PACKAGE EMPHASIZING
INFRASTRUCTURE DEVELOPMENT AND LNG
IMPORTS
Ignasi Guardans, Steven C. Sparling, David L.
Wochner, Alessandro Di Mario, and Michael L.
O’Neill
VOL.16-5
0001
[ST: 1] [ED: m] [REL: 16-5] (Beg Group)
Composed: Mon Apr 25 08:52:22 EDT 2016
XPP 8.4C.1 SP #3 FM000150 nllp 1898 [PW=468pt PD=702pt TW=336pt TD=528pt]
VER: [FM000150-Local:09 Sep 14 16:11][MX-SECNDARY: 25 Mar 16 10:18][TT-: 23 Sep 11 07:01 loc=usa unit=01898-fmvol016]
0
Pratt’s Energy Law Report
VOLUME 16
NUMBER 5
MAY 2016
Editor’s Note: Clean Power Up in the Air
Steven A. Meyerowitz
167
The Long and Winding Road of the Clean Power Plan Litigation
Jim W. Rubin and H. Alex Iliff
169
Senate Passes Reauthorization Bill for PHMSA; House Begins Consideration
Michael K. Friedberg and David C. Whitestone
174
You Have the Right to Remain Concerned: The Clash Between MSHA Special
Investigations and Civil Penalty Cases
Robert Huston Beatty, Jr.
180
Oregon Enacts Phase-out of “Coal by Wire” and Doubles Renewable Portfolio
Standard
Richard H. Allan
186
The Arrival of the Billion Dollar Oil & Gas Bankruptcy Cases
Douglas E. Deutsch
195
The European Commission Approves an Energy Security Package Emphasizing
Infrastructure Development and LNG Imports
Ignasi Guardans, Steven C. Sparling, David L. Wochner, Alessandro Di Mario, and
Michael L. O’Neill
202
0002
[ST: 1] [ED: m] [REL: 16-5]
Composed: Mon Apr 25 08:52:22 EDT 2016
XPP 8.4C.1 SP #3 FM000150 nllp 1898 [PW=468pt PD=702pt TW=336pt TD=528pt]
VER: [FM000150-Local:09 Sep 14 16:11][MX-SECNDARY: 25 Mar 16 10:18][TT-: 23 Sep 11 07:01 loc=usa unit=01898-fmvol016]
43
QUESTIONS ABOUT THIS PUBLICATION?
For questions about the Editorial Content appearing in these volumes or reprint permission,
please email:
Jacqueline M. Morris at ........................................................................................................
Email: ............................................................................... jacqueline.m.morris@lexisnexis.com
For assistance with replacement pages, shipments, billing or other customer service matters,
please call:
Customer Services Department at . . . . . . . . . . . . . . . . . . . . . . . . . . . (800) 833-9844
Outside the United States and Canada, please call . . . . . . . . . . . . . . . . (518) 487-3000
Fax Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (518) 487-3584
Customer Service Web site . . . . . . . . . . . . . . . . . . . http://www.lexisnexis.com/custserv/
For information on other Matthew Bender publications, please call
Your account manager or . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (800) 223-1940
Outside the United States and Canada, please call . . . . . . . . . . . . . . . . . (518) 487-3000
ISBN: 978-1-6328-0836-3 (print)
ISBN: 978-1-6328-0837-0 (ebook)
ISSN: 2374-3395 (print)
ISSN: 2374-3409 (online)
Cite this publication as:
[author name], [article title], [vol. no.] PRATT’S ENERGY LAW REPORT [page number]
(LexisNexis A.S. Pratt);
Ian Coles, Rare Earth Elements: Deep Sea Mining and the Law of the Sea, 14 PRATT’S ENERGY
LAW REPORT 4 (LexisNexis A.S. Pratt)
This publication is sold with the understanding that the publisher is not engaged in rendering legal,
accounting, or other professional services. If legal advice or other expert assistance is required, the services of
a competent professional should be sought.
LexisNexis and the Knowledge Burst logo are registered trademarks of Reed Elsevier Properties Inc., used
under license. A.S. Pratt is a registered trademark of Reed Elsevier Properties SA, used under license.
Copyright © 2016 Reed Elsevier Properties SA, used under license by Matthew Bender & Company, Inc.
All Rights Reserved.
No copyright is claimed by LexisNexis, Matthew Bender & Company, Inc., or Reed Elsevier Properties SA,
in the text of statutes, regulations, and excerpts from court opinions quoted within this work. Permission to
copy material may be licensed for a fee from the Copyright Clearance Center, 222 Rosewood Drive, Danvers,
Mass. 01923, telephone (978) 750-8400.
An A.S. Pratt® Publication
Editorial Office
630 Central Ave., New Providence, NJ 07974 (908) 464-6800
www.lexisnexis.com
(2016–Pub.1898)
0003
[ST: 1] [ED: m] [REL: 16-5]
Composed: Mon Apr 25 08:52:22 EDT 2016
XPP 8.4C.1 SP #3 FM000150 nllp 1898 [PW=468pt PD=702pt TW=336pt TD=528pt]
VER: [FM000150-Local:09 Sep 14 16:11][MX-SECNDARY: 25 Mar 16 10:18][TT-: 23 Sep 11 07:01 loc=usa unit=01898-fmvol016]
36
Editor-in-Chief, Editor & Board of
Editors
EDITOR-IN-CHIEF
STEVEN A. MEYEROWITZ
President, Meyerowitz Communications Inc.
EDITOR
VICTORIA PRUSSEN SPEARS
Senior Vice President, Meyerowitz Communications Inc.
BOARD OF EDITORS
SAMUEL B. BOXERMAN
Partner, Sidley Austin LLP
ANDREW CALDER
Partner, Kirkland & Ellis LLP
M. SETH GINTHER
Partner, Hirschler Fleischer, P.C.
R. TODD JOHNSON
Partner, Jones Day
BARCLAY NICHOLSON
Partner, Norton Rose Fulbright
BRADLEY A. WALKER
Counsel, Buchanan Ingersoll & Rooney PC
ELAINE M. WALSH
Partner, Baker Botts L.L.P.
SEAN T. WHEELER
Partner, Latham & Watkins LLP
WANDA B. WHIGHAM
Senior Counsel, Holland & Knight LLP
Hydraulic Fracturing Developments
ERIC ROTHENBERG
Partner, O’Melveny & Myers LLP
iii
0004
[ST: 1] [ED: m] [REL: 16-5]
Composed: Mon Apr 25 08:52:22 EDT 2016
XPP 8.4C.1 SP #3 FM000150 nllp 1898 [PW=468pt PD=702pt TW=336pt TD=528pt]
VER: [FM000150-Local:09 Sep 14 16:11][MX-SECNDARY: 25 Mar 16 10:18][TT-: 23 Sep 11 07:01 loc=usa unit=01898-fmvol016]
22
Pratt’s Energy Law Report is published 10 times a year by Matthew Bender & Company, Inc.
Periodicals Postage Paid at Washington, D.C., and at additional mailing offices. Copyright 2016
Reed Elsevier Properties SA, used under license by Matthew Bender & Company, Inc. No part
of this journal may be reproduced in any form—by microfilm, xerography, or otherwise—or
incorporated into any information retrieval system without the written permission of the
copyright owner. For customer support, please contact LexisNexis Matthew Bender, 1275
Broadway, Albany, NY 12204 or e-mail Customer.Support@lexisnexis.com. Direct any editorial
inquires and send any material for publication to Steven A. Meyerowitz, Editor-in-Chief,
Meyerowitz Communications Inc., 26910 Grand Central Parkway Suite 18R, Floral Park, New
York 11005, smeyerowitz@meyerowitzcommunications.com, 347.235.0882. Material for publication is welcomed—articles, decisions, or other items of interest to lawyers and law firms,
in-house energy counsel, government lawyers, senior business executives, and anyone interested
in energy-related environmental preservation, the laws governing cutting-edge alternative energy
technologies, and legal developments affecting traditional and new energy providers. This
publication is designed to be accurate and authoritative, but neither the publisher nor the authors
are rendering legal, accounting, or other professional services in this publication. If legal or other
expert advice is desired, retain the services of an appropriate professional. The articles and
columns reflect only the present considerations and views of the authors and do not necessarily
reflect those of the firms or organizations with which they are affiliated, any of the former or
present clients of the authors or their firms or organizations, or the editors or publisher.
POSTMASTER: Send address changes to Pratt’s Energy Law Report, LexisNexis Matthew
Bender, 121 Chanlon Road, North Building, New Providence, NJ 07974.
iv
0036
Composed: Tue Apr 26 10:42:25 EDT 2016
[ST: 167] [ED: 100000] [REL: 16-5]
XPP 8.4C.1 SP #3 SC_00052 nllp 1898 [PW=468pt PD=702pt TW=336pt TD=528pt]
VER: [SC_00052-Local:31 Mar 16 17:00][MX-SECNDARY: 25 Mar 16 10:18][TT-: 23 Sep 11 07:01 loc=usa unit=01898-ch1605]
0
PRATT ’S ENERGY LAW REPORT
The European Commission Approves an
Energy Security Package Emphasizing
Infrastructure Development and LNG Imports
By Ignasi Guardans, Steven C. Sparling, David L. Wochner,
Alessandro Di Mario, and Michael L. O’Neill*
The European Commission has approved an energy security package that
encourages diversification of supply, infrastructure development, and
broader participation in the expanding global liquefied natural gas market.
The authors of this article discuss the energy security package and its
opportunities and challenges.
The European Commission recently published a Sustainable Energy Security
package that aims to minimize natural gas supply disruptions across Europe.1
In addition to efforts to manage increasing natural gas demand and improve
cooperation between European Union (“EU”) Member States, the program
encourages diversification of supply, infrastructure development, and broader
participation in the expanding global liquefied natural gas (“LNG”) market.2
THE ENERGY SECURITY PACKAGE
In formal terms, this Energy Security Package is composed of a series of
policy and regulatory initiatives of diverse nature and legal effects, which are to
be formally approved and implemented in different ways and by different
authorities, partly at the European and partly at national or Member State level.
*
Ignasi Guardans, PhD, is a partner in K&L Gates LLP’s Brussels office, practicing in the
area of public policy law. Steven C. Sparling is a partner in the firm’s Washington, D.C., and
Houston offices, focusing his practice on energy, particularly the global LNG and oil industries.
David L. Wochner is a partner in the firm’s Washington, D.C., office, concentrating his practice
on natural gas, LNG, and oil related matters. Alessandro Di Mario is an associate resident in the
firm’s Brussels office and a member of the Antitrust, Competition and Trade Regulation group.
Michael L. O’Neill is an associate in the firm’s Washington, D.C., office, focusing his practice
on energy, infrastructure, and natural resources issues. The authors may be contacted at
ignasi.guardans@klgates.com,
steven.sparling@klgates.com,
david.wochner@klgates.com,
alessandro.dimario@klgates.com, and mike.o’neill@klgates.com, respectively.
1
European Commission, “Towards Energy Union: The Commission Presents Sustainable
Energy Security Package” (Feb. 16, 2016) available at http://europa.eu/rapid/press-release_IP16-307_en.htm.
2
European Commission, Fact Sheet: “Liquefied Natural Gas and Gas Storage Will Boost
EU’s Energy Security” (Feb. 16, 2016), available at http://europa.eu/rapid/press-release_
MEMO-16-310_en.htm.
202
0037
[ST: 167] [ED: 100000] [REL: 16-5]
Composed: Tue Apr 26 10:42:25 EDT 2016
XPP 8.4C.1 SP #3 SC_00052 nllp 1898 [PW=468pt PD=702pt TW=336pt TD=528pt]
VER: [SC_00052-Local:31 Mar 16 17:00][MX-SECNDARY: 25 Mar 16 10:18][TT-: 23 Sep 11 07:01 loc=usa unit=01898-ch1605]
0
ENERGY SECURITY PACKAGE
The Package includes four areas of action:3
1.
Security of gas supply: the European Commission proposes a new
Regulation (to be approved by the Council and the Parliament)
concerning measures to safeguard the security of gas supply, which will
replace the current one approved in 2010. As any Regulation, this will
be a binding legal instrument imposing identical obligations across the
whole EU;
2.
Intergovernmental agreements: the European Commission proposes
new rules, to be approved by the Council and the Parliament,
imposing obligations on Member State Governments regarding their
energy agreements with non-EU countries;
3.
LNG and gas storage: the European Commission presents a Communication, including a series of policy and regulatory initiatives to be
developed, and asking Member States and other EU authorities to
follow certain policy lines; and
4.
Heating and cooling: the European Commission approves another
Communication of similar effect to the previous one but with
different content.
LNG IMPORTS CAN DIVERSIFY EU’S GAS SUPPLY PORTFOLIO
. . .
Increased LNG imports supported by expanding natural gas pipeline and
storage infrastructure may have significant commercial and geopolitical ramifications for European LNG importers and global LNG suppliers alike.
As the largest natural gas importer in the world, the EU relies on imports to
meet more than half of its annual natural gas demands. In recent years, Russia
has emerged as the largest natural gas supplier for the EU, followed by Norway
with Algeria as a distant third. Many EU Member States, particularly those in
southeastern Europe and the Baltics, depend on a single natural gas supplier.
Therefore, these nations are more vulnerable to supply disruptions, particularly
during high demand periods like cold weather during winter.
Diversifying natural gas supplies is especially groundbreaking for Eastern and
Southern European nations that historically have depended on a single natural
gas provider: Russia’s state-owned Gazprom. Access to a comprehensive
portfolio of gas suppliers around the world, most notably the United States with
3
Legal texts in full, together with their supporting documents, can be found here:
https://ec.europa.eu/energy/en/news/commission-proposes-new-rules-gas-and-heating-andcooling-strategy.
203
0038
[ST: 167] [ED: 100000] [REL: 16-5]
Composed: Tue Apr 26 10:42:25 EDT 2016
XPP 8.4C.1 SP #3 SC_00052 nllp 1898 [PW=468pt PD=702pt TW=336pt TD=528pt]
VER: [SC_00052-Local:31 Mar 16 17:00][MX-SECNDARY: 25 Mar 16 10:18][TT-: 23 Sep 11 07:01 loc=usa unit=01898-ch1605]
0
PRATT ’S ENERGY LAW REPORT
its impending entrance into the ranks of major LNG exporting nations,
strengthens European gas consumers’ negotiating positions with Gazprom,
leading to possible incremental changes in the European gas market. The ability
to develop a portfolio of supply options—in a similar way as Asian utilities have
done over decades—will give Europeans greater security of supply. But the EU
must develop additional market and physical infrastructure to take advantage of
the benefits of LNG imports.
. . . BUT ONLY WITH DEVELOPMENT OF PHYSICAL AND
COMMERCIAL INFRASTRUCTURE THAT ALLOWS ALL EU
MEMBER STATES ACCESS TO THE GLOBAL GAS MARKET
The Sustainable Energy Security Package recognizes that LNG imports can
only support EU Member States to the extent that the Members have both
physical and commercial infrastructure to integrate natural gas market across
Europe. The package recognizes that additional pipelines are necessary to
further integrate Europe’s physical gas market and proposes additional pipeline
investment in Estonia, Romania, Bulgaria, Croatia, Hungary, Lithuania,
Poland, France, Spain, and Portugal. Likewise, the package notes that natural
gas storage is not distributed widely across the EU, necessitating pipeline
connections between nations with natural gas storage capacity and those
without access to storage facilities.
In addition to investment in physical infrastructure, the European Commission also addressed political agreements between EU Member States and
non-EU countries. The European Commission proposed new rules that would
require that the European Commission approve all intergovernmental agreements (“IGAs”) on energy.4 The policy would apply to IGAs between one or
more EU Member State(s) and non-EU countries. IGAs provide “political and
legal support” that can form the basis for commercial negotiations between EU
and non-EU nations. Due to the potential impacts of energy IGAs on the EU’s
internal energy market, the European Commission believes it is necessary to
ensure that all IGAs comply with EU law. In the current system, approved in
2010, the European Commission can only object to an IGA after the parties
have signed it. Now, recognizing the failure of such a compulsory notification
method, the European Commission proposes the introduction of a mandatory
ex-ante compatibility check, forcing Member States to notify the European
Commission of their draft IGAs before concluding the IGA.
OPPORTUNITIES AND CHALLENGES
Most importantly, the Sustainable Energy Security Package will encourage
4
European Commission, Fact Sheet: “Intergovernmental Agreements in Energy” (Feb. 16,
2016), available at http://europa.eu/rapid/press-release_MEMO-16-309_en.htm.
204
0039
[ST: 167] [ED: 100000] [REL: 16-5]
Composed: Tue Apr 26 10:42:25 EDT 2016
XPP 8.4C.1 SP #3 SC_00052 nllp 1898 [PW=468pt PD=702pt TW=336pt TD=528pt]
VER: [SC_00052-Local:31 Mar 16 17:00][MX-SECNDARY: 25 Mar 16 10:18][TT-: 23 Sep 11 07:01 loc=usa unit=01898-ch1605]
0
ENERGY SECURITY PACKAGE
broader access to the global LNG market. Broader market access will lead to
competition for European gas customers, which should lead to lower gas prices
for consumers. The Baltic States’ experience already demonstrates this pattern.
Lithuania’s Klaipedia LNG import terminal, which began operations in 2014,
has encouraged competition among natural gas suppliers for access to Baltic gas
customers. In February 2016, two gas market participants signed terminal use
agreements to receive Norwegian LNG supplies equivalent to up to 50 percent
of Lithuania’s gas demand for 2016.5 Similar infrastructure development across
the rest of the EU should encourage similar competition between established
market participants and new market entrants alike and should moderate natural
gas prices for European gas consumers.
Despite the economic benefits, a number of challenges remain. First, the
program’s success depends on further integrating European natural gas markets
and capital-intensive physical infrastructure. European energy market integration and transparency has proven an elusive goal for more than a decade.
Economic conditions, energy supply options, and environmental factors vary
significantly across the EU Member States, limiting the effectiveness of
EU-wide policy mandates. The program’s move toward regional, not EU-wide,
energy policymaking is an important step.6 Funding infrastructure development is another significant obstacle, and will require substantial capital
investments. But in order to harvest the full benefits of participation in the
global natural gas market, EU Member States must continue to integrate their
energy markets and physical infrastructure.
Second, participation in the global natural gas market means competing for
gas supplies with traditional LNG purchasers like Japan and South Korea, as
well as with emerging LNG consumers like China and India. If Asian energy
demand increases over the medium and long run, EU Member States could face
higher LNG prices, though proximity to U.S. Gulf of Mexico LNG exports
should help mitigate against some price spikes in the medium to long term. In
fact, representatives of several Central and Eastern European nations have been
advocating aggressively with the White House and Congress in Washington,
DC, to liberalize the U.S. regulatory approval process for LNG exports.7 It
5
Petras Vaida, Lithuanian LNG Terminal Is Stimulating Competition, THE BALTIC COURSE
(Feb. 10, 2016), available at http://www.baltic-course.com/eng/energy/?doc=116562.
6
European Commission, Fact Sheet: “Security of Gas Supply Regulation” (Feb. 16, 2016),
available at http://europa.eu/rapid/press-release_MEMO-16-308_en.htm.
7
See, e.g., “Latvian Minister Addresses LNG Allies,” at http://www.lngallies.com/latvianminister-addresses-lng-allies/ (Jul. 18, 2015); “In Response to Russian Aggression, Key Central
European Nations Plead for U.S. Natural Gas Exports,” at http://www.speaker.gov/press-release/
205
0040
[ST: 167] [ED: 100000] [REL: 16-5]
Composed: Tue Apr 26 10:42:25 EDT 2016
XPP 8.4C.1 SP #3 SC_00052 nllp 1898 [PW=468pt PD=702pt TW=336pt TD=528pt]
VER: [SC_00052-Local:31 Mar 16 17:00][MX-SECNDARY: 25 Mar 16 10:18][TT-: 23 Sep 11 07:01 loc=usa unit=01898-ch1605]
0
PRATT ’S ENERGY LAW REPORT
seems reasonable to expect that some EU gas consumers, including several of
those engaging in this U.S. debate, might consider marginal natural gas price
increases to be a small cost for supply diversity, particularly if their country
historically has been held captive to Russian gas supplies. But participation in
the global market means increased exposure to economic and non-economic
factors around the world that can affect the price consumers pay for natural gas.
This action represents one more example of the European Commission
addressing an important European issue with a “package;” that is, by simultaneously pushing a series of linked legal instruments dealing with the different
and interrelated aspects of the matter. In political terms, this method has proven
effective in facilitating the debate as a whole, instead of in fragmented and
isolated discussions on each of the measures proposed. However, as each one of
the measures needs to follow its own path of approval and effective implementation, there have been cases where “packages” as a whole have been delayed or
strongly weakened due to Member State resistance to some of the parts of the
package. This should not be the case here, but it may be too early in the process
to anticipate the terms of each debate.
response-russian-aggression-key-central-european-nations-plead-us-natural-gas-exports#sthash.
ZlR5vQqp.dpuf (Mar. 8, 2014).
206