This regular publication by DLA Piper lawyers focuses on helping clients navigate the ever-changing business, legal and regulatory landscape.

  • Department of the Interior opens areas for oil and gas drilling through 2022; industry says it’s not enough. The US Department of the Interior has announced a draft five-year plan to open much of the Atlantic coastline from Virginia to Georgia and parts of Alaska to offshore oil and gas drilling from 2017 to 2022, but industry groups and Alaska elected officials say the department should have acted more broadly. The industry asserted in a press call on February 9, the day that public comment began, that even after the department’s plan, 87 percent of the US coastline is not available for drilling. The proposal would not permit the activity off Florida and the Pacific Coast. The industry says the limitations on drilling will stand in the way of an increase in US jobs. However, Interior has said in the past that opposition from the states of California, Oregon and Washington prevents drilling off those states’ coasts.
  • Possible role for FERC as broker between electric utility industry and EPA in reducing carbon emissions from power plants. Cheryl LaFleur, chair of FERC, said in a speech at the National Press Club on January 26 that her agency has considerable expertise in the technical and regulatory aspects of electric power and can act as an “honest broker” in the highly charged debate concerning reliability of the nation’s electric grid. The EPA has proposed a highly controversial Clean Power Plan under Section 111(d) of the Clean Air Act that is designed to reduce carbon emissions from power plants in order to mitigate the possible effects of climate change. Electric power providers and some state regulators have pushed back and have said that the EPA’s regulatory proposal lacks a legal basis and, if not carefully thought through, could end up reducing the reliability of the nation’s electric grid. LaFleur said the possible shift away from coal-fired power plants to those relying on wind power, solar power and natural gas would probably amount to “a lot more than tinkering around the edges” and has to be done with considerable thought.
  • More funding for CFTC; a potential increase in regulatory burdens. The powers and clout of the Commodity Futures Trading Commission (CFTC) have been a subject of considerable dispute lately. The administration’s current budget proposal, announced February 3, would increase funding for the agency and potentially increase regulation on energy traders and their activities. The administration’s current budget proposal would fund the CFTC in fiscal 2016 to the tune of $322 million, a 29 percent increase from the current $250 million budget. The CFTC’s oversight responsibilities have grown since 2010 to include high–stakes derivatives trading that many energy traders are involved in – a change that recently became a contentious issue when lawmakers sought to reduce President Barack Obama’s budget for the agency. The President’s proposal would provide 895 full-time staff, an increase of 149 employees from current levels. Almost 40 percent of the requested $72 million increase would be used for upgrades in information technology for market surveillance and data collection to enforce the agency’s rules and keep a careful eye on trading irregularities.
  • Proposed increase in funding to oversee the safety of transporting crude oil by rail, an emerging legal and risk issue for oil companies. Although not much crude oil is transported by rail today compared with the volume of pipeline transportation, rail transport still adds up to a million barrels a day, up from near zero seven years ago, and the amount is expected to increase. As the number of derailments across the US climbs, there is understandable concern in the industry and among safety specialists about the possibility of a rail transport disaster similar to the tragedy that killed 47 people in Québec in 2013. A year ago, the administration had proposed a $40 million fund to support regulatory cooperation for crude-by-rail. The current budget, announced February 3, allocates only a new $5 million to the Department of Transportation to ensure the “safe transport of oil,” including for “emergency response activities in the event of an incident involving transportation of energy products.” An American Petroleum Institute spokesman says the industry will “continue to work with regulators and the railroad industry to enhance the safety of shipping crude by rail through a comprehensive effort to better prevent, mitigate and respond to incidents.”
  • California getting more strict on injection of fluids into federally protected aquifers.California state regulators may soon be changing their regulation of the injection by oil companies of fluids into aquifers that can be used for drinking water. That’s in the wake of an Associated Press report on February 5 stating that state regulators in California, the nation’s third largest oil-producing state, have over the years permitted oil companies to inject production fluids and waste into what are now federally protected aquifers. Forty-six percent of the wells involved were approved or began injections under current Governor Jerry Brown. The federal government has communicated to California its views over this practice. Observers expect that the likely outcome will be a significant change in the injection permit process in California.
  • Fracking regulation will remain in hands of state regulators, not federal agencies. The oil and gas industry won a major victory on Capitol Hill, keeping the regulation of fracking in the hands of state agencies, not federal ones. On January 30, the US Senate sided with the oil and gas industry and rejected a proposed change in a provision in the 2005 energy bill that exempted fracking from the underground injection control (UIC) provisions of the Safe Drinking Water Act. This provision, widely known as the “Halliburton loophole,” prevents the EPA from regulating fracking or requiring a federal permit for it. The vote means that the regulation of hydraulic fracturing remains in the hands of state agencies. This was the first congressional floor vote in several years on this key regulatory question. The industry has always insisted that, regardless of the nature of the regulation it faces, it has taken all appropriate steps to ensure that groundwater and the environment are safe and clean.