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MA Highest Court Quashes State’s Attempt to Allow Electric Power Suppliers to Fund Increased Gas Pipeline Capacity Via Passthroughs to Ratepayers

In a decision dated August 17, 2016, the Supreme Judicial Court of Massachusetts vacated an order of the Massachusetts Department of Public Utilities (MDU) which would have had the effect of subsidizing, via a pass-through to ratepayers, the cost to electric energy suppliers of developing increased natural gas pipeline capacity into the state.  This was also a big win for plaintiff ENGIE Gas & LNG LLC (formerly GDF Suez Gas NA LLC), a major importer of LNG. See 

https://1.next.westlaw.com/Document/I41144b53646211e6a807ad48145ed9f1/View/FullText.html?navigationPath=Search%2Fv3%2Fsearch%2Fresults%2Fnavigation%2Fi0ad7052400000156bab7d9de70f5423e%3FNav=CASE%26fragmentIdentifier=I41144b53646211e6a807ad4814
MDU saw a problem in the limited availability of natural gas pipeline capacity for gas-fired electric generation and attempted to solve that problem through an expansive reading of Massachusetts law. MDU would have permitted electric power companies to sign long-term contracts, typically 20 years, with natural gas suppliers to permit the suppliers to secure funding for new pipeline construction.  MDU also saw that the electricity producers wouldn’t be willing to take on the risk of those contracts and authorized the electric generators to pass the cost of the pipeline capacity through to consumers.

ENGIE has an LNG import facility in Massachusetts.  Because of the competitive threat the MDU order posed to ENGIE’s business, it sued to overturn the order. An interesting twist is that the independently elected Attorney General of Massachusetts, a Democrat (the Governor is Republican), filed an amicus brief in the case also urging vacation of the MDU decision, in part because the Attorney General had already taken the public position that Massachusetts did not need more gas pipeline capacity and should look to renewable sources of energy to meet future electric energy demand.  

Now the ball is back in the Legislature to consider whether to amend the law to authorize the subsidy program that the MDU proposed.  But the SJC decision also keeps very much alive the issue whether there is a natural gas capacity problem, leading to higher electric energy prices, that cannot be resolved without additional gas pipelines, or whether new sources of alternative energy, wind, solar, hydropower, plus LNG, can meet the State’s electric energy demand. 
Kenneth A. Reich, Esq., Principal, Kenneth Reich Law, LLC

Steve Kalish, Esq.

August 2016

Note:  This article may be considered legal advertising in some jurisdictions.

©KennethA.Reich 2016

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EPA/ARMY CORPS Issue Long Awaited Final Rule Defining “Waters of the United States”

       On May 27, 2015, the EPA and the Army Corps of Engineers issued a final Rule defining “waters of the United States” (“WUS”) for purposes of the federal Clean Water Act. Click here for the final Rule.

       The Rule provides needed clarity to the definition of WUS, whose coverage has been made muddy by a trio of recent Supreme Court cases, culminating in the plurality opinion in Rapanos v. United States, 547 US 715 (2006). The bottom line for practitioners and for their clients is that the EPA has established some bright line tests for what are and are not considered WUS, but still leaves it to the Army Corps, EPA and the States to determine on a case by case basis the close calls. Call it clarity with a large asterisk.

       NOTE that the Rule and Preamble are more than 250 pages and defy easy summarization. This blog article highlights the key points one needs to know about the significance of the Rule, but a close reading of the Rule is necessary for anyone attempting to make decisions or give advice regarding its content.

          A. The Rule clarifies that the following bodies of water are jurisdictional WUS by rule:

          1. traditional navigable waters

          2. interstate waters

          3. territorial seas

          4. impoundments of jurisdictional waters

          5. tributaries

          6. adjacent waters

       The Rule provides helpful details on the definition of these terms in order to eliminate ambiguity present in the proposed rule.

          B. The Rule categorically excludes the following waters from being classified as WUS:

          1. already exempted waters like agricultural drainage and previously created farmlands

          2. groundwater, about which there had been some dispute

          C. The Rule provides that all other waters are to be evaluated on a case by case basis to determine if they meet the “significant nexus” test. “Significant nexus” is essentially defined as it was by J. Kennedy in his concurrence in Rapanos: whether a water has the potential to impact the “chemical, physical and biological integrity of [jurisdictional waters]”. Where the connection is “speculative or insubstantial” there is no significant nexus.

       In order to narrow the scope of waters that will need to undergo a case by case analysis, the Rule sets forth some bright line tests and guidelines.

Conclusion

       The purpose of the Rule was to attempt to bring clarity to this decidedly murky area of law for the benefit of farmers, developers, landowners and a myriad of other parties affected by the definition of the term WUS. The Rule largely accomplishes its purpose, although it still leaves a number of situations to case by case determination. Hopefully the EPA and the Army Corps will issue guidance or further rules to narrow the universe of situations in which a case by case determination is necessary. Whether the Rule went too far or not far enough is in the eye of the beholder and will be inevitably decided by the courts.

Kenneth A. Reich, Esq.

June 2015

*This blog article does not constitute and should not be interpreted as legal advice related to a specific issue arising under or impacted by the Rule. Readers are cautioned to consult a lawyer with significant experience in the field for specific legal advice regarding the coverage of the Rule.