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Energy & the Law

The Fat Lady Who Hasn’t Sung, Oil Field Technology, and a Lizard

Posted in Contract Disputes, Regulations

Today is a grab-bag of topics, a pastiche if your college tuition was higher than mine.

When Will the Fat Lady Sing?

El Paso Marketing, LP v. Wolf Hollow I, L.P., involving a gas plant Supply Agreement, continues its tortured journey through the Texas civil justice system. Chance Decker and I reported on this case in July 2012.

El Paso provides natural gas for a power plant owned by Wolf Hollow. El Paso has a Transportation Agreement with Enterprise. Interruptions in gas delivery required purchase of replacement power. Wolf Hollow claims Enterprise delivered gas contaminated with liquids that damaged the plant, requiring plant upgrades and the purchase of replacement power.

I won’t delve into the complicated procedural history, except to say that the Supreme Court refers to Wolf Hollow I, III and II (no doubt this will be IV). The court of appeals misunderstood it to say it held on the merits that Wolf Hollow was entitled to recover on its claim for replacement power damages resulting from poor quality gas.  The Supreme Court says it didn’t rule on that and remanded the case for proceedings “consistent with this opinion.”

The opinions case (but not necessarily this one) are worth following in that they address a number of legal issues:  The force majeure provision of the Supply Agreement; waiver of consequential damages; default and remedy provisions, including how a contract treats gas quality and gas quantity (to interpret:  use your words carefully); and cover damages.

Technology Marches On

According to Leon Rosen, with the Futurest (a publication of the World Future Society), NET Power is constructing the first natural gas power plant that will completely sequester carbon. The rationale (read it for yourself) is that rather than burning natural gas in ambient air, which produces nitrous oxide, the energy driver is compressed CO2.  It’s way more complicated than that but is good news for the gas industry and the environment.

Whither the Dunes Sagebrush Lizard? (or as his mother would say, “sceloporus arenicolus”)

Last month a federal district judge dismissed a suit by environmental groups over an agreement between the state of Texas and oil and gas producers in which the industry would promise to protect vast expanses of the lizard’s shinnery-oak habitat. The agreement was to avoid what was referred to as the “regulatory rigidity of the Endangered Species Act”. The suit had claimed that the U.S. Fish and Wildlife Service erred by allowing voluntary conservation agreements to eliminate threats to the dunes sagebrush lizard. Environmental groups said the pacts were not enforceable or verifiable. The original agreement was either a welcome respite from unnecessary regulation, smart policy,  or the end of the little fella’s time on this earth.

References to “the industry” are misleading; the players do not take their orders from Dick Cheney. But it seems to me this is “the industry’s” opportunity to prove that it can be a responsible steward of the environment.

Today’s musical interlude – having nothing to do with the topics – features dead white-boy blues guitar players who died too young – one from the ’60’s and one from the ’80’s.