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FERC, CFTC, and State Energy Law Developments

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A cyberattack on a single gas compression facility resulted in the shutdown of a natural gas pipeline for two days, according to a recent alert from the US Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA).

The Pipeline and Hazardous Materials Safety Administration (PHMSA) will hold a two-day public meeting on February 26–27, 2020, to discuss with pipeline safety stakeholders the implementation of two final rules published in the Federal Register on October 1, 2019: the Safety of Gas Transmission Pipelines final rule (published at 49 CFR Parts 191–192) and the Safety of Hazardous Liquid Pipelines final rule (published at 49 CFR Part 195). PHMSA has made available for comment and discussion in Docket PHMSA-2019-0225 the meeting agenda draft, frequently asked questions (FAQs), and answers for both rules.

According to PHMSA, “the FAQs are intended to assist in the implementation of these final rules by providing clarification, guidance, information sources, and affirmation to operators as they strive to comply with the new safety regulations.” During the first day of the meeting, PHMSA also is planning to discuss the benefits of pipeline operators developing an effective safety culture. The agenda, however, is less clear on this portion of the meeting.

Our colleagues in the tax practice prepared a LawFlash examining the Internal Revenue Service’s new guidance on the federal income tax credit for carbon capture projects under Section 45Q of the Internal Revenue Code of 1986.

Read the LawFlash.

The US Court of Appeals for the Fourth Circuit  resolved a question of first impression on February 11 on when the statute of limitations period commences for civil enforcement claims brought by the Federal Energy Regulatory Commission (FERC) under the Federal Power Act (FPA or the Act) when the alleged violator opts for adjudication in federal district court instead of an administrative proceeding. Siding with FERC, the Fourth Circuit held in FERC v. Powhatan Energy Fund that when an alleged violator decides to pursue adjudication in court, FERC’s claim accrues, and thus the statute of limitations commences, when the alleged violator fails to pay within 60 days the amount set forth in FERC’s Penalty Assessment Order. The decision means that when an alleged violator opts for the district court, FERC can enforce civil penalties for an FPA violation up to 10 years after the date of alleged unlawful conduct.

Legal Framework

The FPA creates two procedural options by which FERC can assess civil penalties. Under one option, the “Default Option,” a FERC Administrative Law Judge (ALJ) will hear the dispute. Under the second option, the “Alternate Option,” adjudication occurs in federal district court. The alleged violator may chose the path.

To help guide companies through this multifaceted public health crisis, Morgan Lewis has launched Responding to the 2019 Novel Coronavirus to keep on top of developments as they unfold.

The Pipeline and Hazardous Materials Safety Administration’s (PHMSA’s) long-awaited final rule on the minimum safety standards for underground natural gas storage facilities (UNGSFs) was published in the February 12 Federal Register. The final rule amends the pipeline safety regulations applicable to depleted-hydrocarbon reservoirs, aquifer reservoirs, and solution-mined salt caverns used to store natural gas. These pipeline safety regulations were established in an interim final rule that PHMSA issued in December 2016 in response to a recent significant gas leak and the mandate in the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (the PIPES Act). The PIPES Act directed PHMSA to establish minimum safety standards for depleted-hydrocarbon reservoirs, aquifer reservoirs, and solution-mined salt caverns used to store natural gas. The final rule becomes effective March 13, 2020.

A declaratory order issued by the Federal Energy Regulatory Commission (the Commission) on January 30 in Docket No. RP20-41-000 grants pipeline developers greater certainty in planning and siting construction. The order was issued after a split 2-1 vote. It may also significantly reduce pipeline developers’ expenses by avoiding costly disputes with states over the possession of state-owned land. The order resulted from a petition filed by a company (Pipeline) seeking to construct an approximately 116-mile greenfield natural gas pipeline designed to provide firm natural gas transportation service from receipt points in the eastern Marcellus Shale region, in Luzerne County, Pennsylvania, to delivery points in New Jersey and Pennsylvania (the Project). The petition requested the Commission’s interpretation of the scope of the eminent domain authority in Section 7(h) of the Natural Gas Act (NGA).

In November 2019, New Jersey Governor Phil Murphy issued Executive Order 92 increasing the state’s offshore wind generation goal from 3,500 MW by 2030 to 7,500 MW by 2035. To date, the New Jersey Board of Public Utilities (BPU) has approved only one 1,100 MW offshore wind project, but is expected to conduct additional solicitations in 2020 and 2022 and approve approximately 2,400 MW of additional offshore wind generation.

New Jersey Governor Phil Murphy signed S. 2252 into law on January 17, 2020. The bill takes steps to advance electric vehicle (EV) goals proposed in the draft New Jersey Energy Master Plan (which was released in June 2019 but has not been posted in final form). By enacting this legislation, New Jersey joins several states, including Oregon and Colorado, that have taken action to encourage EV adoption in recent months.

The bill establishes statewide goals for EV growth in New Jersey and the development of statewide charging infrastructure, each of which will be supported by $300 million in state incentives over the next decade through programs to be established by the New Jersey Board of Public Utilities (BPU). The bill also advances electrification of the state’s transportation fleet by requiring state agencies to escalate purchases of EVs.