The Sierra Club initiated three separate lawsuits to overturn the stay.  The district court decided that EPA does have the authority to issue the stay under the Administrative Procedure Act (“APA”) for more than 3 months if the rule is being reconsidered.  The court also stated that EPA was correct in that the agency did not have to undertake notice and comment procedures to issue the stay.  The district court then determined EPA’s action in issuing the stay was arbitrary and capricious, and the court ruled that EPA could only issue a stay greater than three months if the APA rule needed to be halted pending judicial review, as opposed to agency reconsideration.  In this case, EPA’s justification for the stay was not for judicial review.  Hence, the court issued an order vacating the stay, which means the rule is in effect again.

EPA is still conducting proceedings to reconsider the MACT rule.  EPA may ask the court to stay its decision while the decision is appealed.  In addition, the parties in the pending boiler MACT litigation, which is stayed pending the reconsideration, may ask the court for a stay.  EPA could reissue the stay with a new rationale tied to the appeals, which will likely face more challenges in court. 

 A copy of the court’s order is available here.

Pursuant to this ruling, the Department of Commerce (“Commerce”) will continue its ongoing investigation and determine whether Chinese producers are selling at less than fair value in the U.S. (dumping) or are subsidized by the Chinese government, and will determine antidumping and countervailing duty margins for these producers.  Commerce has already selected the companies it will investigate in the countervailing duty case – Trina Solar and Suntech.  Commerce’s respondent selection in the anti-dumping case is expected shortly.  A preliminary decision on countervailing duties could come as early as January 2012, although Commerce can delay a decision until March if it needs more time to complete its investigation.  The antidumping duty preliminary determination is currently scheduled for March 27, 2012, but that decision can also be extended. 

Once Commerce makes its determination, the ITC will conduct a final investigation, which will involve another round of briefing and a hearing before the full Commission. If the ITC votes in the affirmative at this final stage, antidumping and countervailing duty orders will be imposed. The Commission’s affirmative preliminary vote is not unexpected – it is very rare for the Commission to vote in the negative at the preliminary stage as there are often many issues that remain unresolved which the Commission feels that it needs to investigate further in the final stage.

In April, the Department of Interior (“Interior”) gave its final approval to the Cape Wind Project (see April 25, 2011 edition of the WER).  The Cape Wind project is a 130 turbine wind farm, and it is the first commercial wind project to sign a lease with the Interior for the development on the Outer Continental Shelf (see October 8, 2010 edition of the WER).  The Interior’s lease specifically states the Cape Wind Project must abide by any future FAA mitigation that might be imposed in order to eliminate any hazards of the project.  The town of Barnstable, Massachusetts and the Alliance to Protect Nantucket Sound (together the “petitioners”) petitioned the DC Circuit, arguing that the FAA violated its governing statute, misread its own regulations, and arbitrarily and capriciously failed to calculate the dangers of the project to local aviation.  The FAA countered that the petitioners lacked standing and that the claims brought are faulty.  The DC Circuit sided with the petitioners, finding the FAA misread its own regulations and did not adequately justify its No Hazard determinations.

The DC Circuit relied heavily on evidence submitted by the petitioners, air traffic controllers, and an airline company showing the potential safety risks, particularly to pilots that fly under visual flight rules (”VFR”).  Those pilots regularly fly beneath the fog and inclement weather in the sound, but the FAA downplayed those hazards by relying on a narrow provision of its own handbook.  However, the DC Circuit cited to multiple regulations that were never addressed by the FAA as part of the No Hazard determinations, and the DC Circuit found several instances where the safety of VFR aircrafts could be jeopardized by the Cape Wind Project.  The DC Circuit found that the FAA may still come to the same conclusion, but the agency cannot circumvent its responsibility to analyze the risks posed by the Cape Wind Project and fully explain its conclusions. 

A copy of the DC Circuit opinion is available here.

FERC implemented Order Nos. 720 and 720-A to comply with the Energy Policy Act of 2005 (“EPAct 2005”) and specifically Section 23 of EPAct 2005, which amended the NGA to direct FERC to “facilitate price transparency in markets for the sale or transportation of physical natural gas in interstate commerce.”  In order to effectuate this directive, FERC adopted, through Order No. 720, the “Posting Rule,” which requires that major non-interstate pipelines post scheduled flow information and post receipt and delivery point information for points with capacity greater than 15,000 MMBtu per day.  FERC lowered the number of non-interstate pipelines covered by the rule in Order No. 720-A, but the Petitioners filed for review with the 5th Circuit.

FERC argued that its interpretation of the NGA and Section 23 of EPAct 2005 authorized the Posting Rule.  Petitioners argued that the Posting Rule was outside the authority granted to FERC by the NGA, and violated the Administrative Procedure Act.  The 5th Circuit considered FERC’s interpretation under the Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc. two-part test and found that Section 23 of EPAct 2005 cannot apply to pipelines that are involved solely in the “local distribution of gas” or involved in “other transportation.”  The 5th Circuit held that FERC “sees ambiguity in otherwise clear provisions,” and had not considered Section 23 within the context of Section 1(b) of the NGA, which states that “[t]he provisions of the chapter shall apply to transportation of natural gas in interstate commerce, to the sale in interstate commerce of natural gas for resale.., and to the importation or exportation of natural gas in foreign commerce…, but shall not apply to any other transportation or sale of natural gas or to the local distribution of natural gas or to the facilities used….”  The 5th Circuit further held that Congress did not intend to regulate the “entire natural-gas field to the limit of constitutional power,” but instead left regulation of specific entities, like intrastate pipelines, to the states.  The court pointed to the historical recognition of a distinction between interstate and intrastate natural gas transactions.

A copy of the 5th Circuit’s decision is available here.

Montana Consumer Counsel, the States of Connecticut, Illinois and Rhode Island, and Public Citizen, Inc., Colorado Office of Consumer Counsel, and Public Utility Law Project of New York, Inc. (together, “Petitioners”) filed petitions for review of Order No. 697 and Order No. 697-A, contending: (1) that FERC, by relying solely on the market to regulate rates, has violated its statutory obligation to ensure that rates are just and reasonable; and (2) that the market-based rates policy, which allows sellers to file a market-based rate and does not require sellers to give sixty days advance notice of changes in market prices, violates the express terms of the FPA.  The petitioners made arguments concerning (1) competitiveness of the market; (2) empirical evidence; (3) reporting requirements; (4) reviewing reports for market power and manipulation; and (5) filed rates and sixty-days-notice-requirement.

In its decision, the Court rejected the Petitioners’ argument that FERC has to assess the overall competitiveness of the market, and relied on earlier court decisions where no such finding is required.  The Court also rejected Petitioners’ argument that the Commission must conduct an empirical analysis or offer substantial evidence that competition among sellers will drive rates to reasonable levels.  The Court stated that FERC’s order requires the collection of empirical data through its screening process and that if a seller passes such market power screening, then the seller’s prices will be just and reasonable. In terms of reporting requirements, the Court deferred to the Commission’s decision to require market-power analysis reports every three years as well as the Commission’s decision to exempt Category 1 sellers from market power analyses as such decisions are within the Commission’s discretion and do not give the Court sufficient cause to invalidate FERC’s market-based rate policy.  The Court further found that the law enables the Commission’s approach as stated in Order No. 697 and that FERC can ensure rates are just and reasonable by indirectly regulating the wholesale market. 

Petitioners also contended that market-based rate sellers will violate the prior notice requirement that rates be filed with FERC before they go into effect.  The Court found that FERC has broad discretion to construe the FPA’s notice and filing requirements.  It is reasonable for FERC to construe the statute to find that a rate “change” (triggering the prior notice requirement) occurs only once during the filing for authorization to sell at market-based rates. 

A copy of the Court’s decision is available here.