OU LAW

ENERGY LAW: LARSON

FALL 2013

Phan Nguyen Today

Table of Contents
CLIMATE CHANGE: WHAT IT IS, WHY IT MATTERS.......................................................................5 ENVIRONMENTAL KUZNETS CURVE AND WHY DO WE CARE? ..............................................................................5 COASE THEORM AND TRAGEDY OF THE COMMONS:............................................................................................5 PRECAUTIONARY PRINCIPLE: .................................................................................................................................5 HOW DOES THE LAW ENCOURAGE MITIGATION OF CLIMATE CHANGE? .............................................................5 HOW DOES THE LAW ENCOURAGE USE OF RENEWABLE ENERGY SOURCES? ......................................................8 HOW DOES THE LAW ENCOURAGE ENERGY EFFICIENCY AND CONSERVATION?..................................................8 NEPA & ESA CONSULTATION: ............................................................................................................... 11 THE NATIONAL ENVIRONMENTAL POLICY ACT (NEPA) AND ENERGY: ............................................................... 11 Speaking the NEPA Language: ......................................................................................................................... 11 Segmentation and Cumulative Effects: ........................................................................................................... 12 The Endangered Species Act (ESA) Section 7 Consultation and Energy: ............................................................ 13 Background on the ESA: .................................................................................................................................. 13 Southwest Center for Biological Diversity v. U.S. Bureau of Reclamation (1998) ........................................... 13 WATER RIGHTS: ............................................................................................................................................. 14 Navigation: .......................................................................................................................................................... 14 Boundaries & Beds: ............................................................................................................................................. 14 Theories of Water Rights: ................................................................................................................................... 15 Groundwater Rights: ........................................................................................................................................... 17 Tribal Rights:........................................................................................................................................................ 18 Interstate Water Apportionment: ....................................................................................................................... 18 HYDROELECTRIC POWER: ........................................................................................................................ 20 Mills and Property Rights vs. Energy Development: ........................................................................................... 20 Fisk v. Framingham: canals, mills, and flooding .............................................................................................. 20 Dams and Federal Agencies: ............................................................................................................................... 20 U.S. Agencies & Dam Development: ............................................................................................................... 20 The Cost & Benefits of Big Dams: ........................................................................................................................ 22 Three Gorges: .................................................................................................................................................. 22 Tennessee Valley Authority: ............................................................................................................................ 22 Water Security: ................................................................................................................................................ 22 Pros and Cons .................................................................................................................................................. 22 1

Big Dam Issues: ................................................................................................................................................... 23 Sediment Management: .................................................................................................................................. 23 Benefit Sharing: ............................................................................................................................................... 23 Financing:......................................................................................................................................................... 23 PUBLIC LANDS: ............................................................................................................................................... 24 The Wilderness Act of 1964: ............................................................................................................................... 24 Managing Designated Wilderness Areas: ........................................................................................................ 24 ANWR & Wildlife Refuges:............................................................................................................................... 25 Bureau of Land Management & the Federal Land Policy Management Act of 1976: ........................................ 25 Withdrawal Authority: ..................................................................................................................................... 26 Multiple Use & Sustained Yield: .......................................................................................................................... 26 Areas of Critical Environmental Concern: ....................................................................................................... 27 R.S. 2477 and Southern Utah Wilderness Alliance (2005): ............................................................................. 27 PUBLIC UTILITIES:........................................................................................................................................ 28 Common Law & Public Utilities: .......................................................................................................................... 28 Public Utilities: ................................................................................................................................................. 28 Duty to Serve, Reasonable Prices, Monopoly Power: ..................................................................................... 29 The Contract Clause: ........................................................................................................................................... 29 Proprietors of Charles River Bridge v. Proprietors of Warren Bridge (1837): Competition and impairment of Contracts ...................................................................................................................................................... 29 Due Process: ........................................................................................................................................................ 29 Munn v. Illinois (1877): Setting maximum prices for the use of private property for a public purpose ..... 29 RATEMAKING: ................................................................................................................................................. 31 Basics: .................................................................................................................................................................. 31 A Basic Understanding of the Economics:........................................................................................................... 31 Natural Monopolies, Economies of Scale, Network Economies ..................................................................... 31 Cost of Service Ratemaking: R=O + B(r) [R is revenue requirement, O is operating expenses (variable costs), B is rate base (fixed costs), and r is the rate of return............................................................................. 32 Approaches to Ratemaking & Criticisms: ............................................................................................................ 32 Local vs. State vs. Federal: .................................................................................................................................. 33 Federal Energy Regulatory Commission: ......................................................................................................... 33 State Commissions & Politics .......................................................................................................................... 33 The Ben Avon Doctrine & Confiscatory Ratemaking: .......................................................................................... 33 Ben Avon Doctrine: .......................................................................................................................................... 33 Smyth v. Ames (1898): Constitutional limits of calculating rate base ......................................................... 34 2

Bluefield Water Works & Improvement Co. v. Public Service Communication (1923): Confiscatory ratemaking and the rate of return ............................................................................................................... 34 FPC v. Hope Natural Gas (1944): is this the end of the Ben Avon Doctrine? .................................................. 34 Jersey Central Power & Light Co. v. FERC (D.C.Cir.1987): What must be included in rate base? ................... 34 CONCESSION CONTRACTS & PSAs: ................................................................................................... 36 Concession Contract: .......................................................................................................................................... 36 Concession Contract ........................................................................................................................................ 36 Exploration and Production ............................................................................................................................. 36 Distribution ...................................................................................................................................................... 36 Advantages & Disadvantages .............................................................................................................................. 36 Production Sharing Agreements: ........................................................................................................................ 37 Production Sharing Agreements: .................................................................................................................... 37 Advantages & Disadvantages as compared to concessions: ........................................................................... 37 International Investment Law & Nationalization: ............................................................................................... 37 Spectrum: ........................................................................................................................................................ 37 Transparency & Corruption:................................................................................................................................ 38 Drafting the Concession Contract: .................................................................................................................. 38 TRANSMISSION: ............................................................................................................................................. 39 Distributed Generation: ...................................................................................................................................... 39 Distributed Generation:................................................................................................................................... 39 Policies & Obstacles for Deployment........................................................................................................... 40 Transmission Line Siting: ..................................................................................................................................... 40 Transmission & Renewable Energy.............................................................................................................. 40 Piedmont Environmental Council v. FERC (4th Cir. 2009): FERCs role in interstate line sitting ................... 40 Transmission Cost Allocation: ............................................................................................................................. 40 Illinois Commerce Commission v. FERC (7th Cir.2009): FERC rates and Regional Transmission Organizations ......................................................................................................................................................................... 40 Smart Grids:......................................................................................................................................................... 40 LETS SAY YOU WANT TO:.................................................................................................................... 42 Start a Hydraulic Fracturing Operation: .............................................................................................................. 42 What are your liability concerns? .................................................................................................................... 42 Build & Operate a Hydroelectric Plant: ............................................................................................................... 42 What permits do you need? ............................................................................................................................ 42 What Agencies will you have to deal with? ..................................................................................................... 43 Generate and Distribute electricity with a hybrid natural gas/wind farm: ........................................................ 43 3

What if you want to operate on federal land? ................................................................................................ 43 What are your concerns? ................................................................................................................................ 43 What are the obstacles? .................................................................................................................................. 43 Drill for Offshore Oil: ........................................................................................................................................... 43 On what grounds will opponents challenge your project? ............................................................................. 43

CLIMATE CHANGE:
CLIMATE CHANGE: WHAT IT IS, WHY IT MATTERS
Climate Change vs. Weather: o Climate is what you expect, weather is what you get. o Weatherdescribes the fluctuating state of the atmosphere and rapidly rising and decaying weather systems. o Climateaddresses average weather over timeseasonal, annual, decadal, centennialand describes the variability observed in that time period. Global temperatures are increasing (Undisputed fact): o The problem is whether or not the increase of temperature is man made or it just comes a time when it heats up (natural)

ENVIRONMENTAL KUZNETS CURVE AND WHY DO WE CARE?

Left side of the curve are the underdeveloped/developing nations who are burning off emissions and using a lot of fossil fuels et o Left side argues that the Right side already had their chance to emit greenhouse gases to get to where they are, they only want the same opportunity to do the same. o Left side trying to get to the point where they can reduce emission of greenhouse gases. Right side of the curve are the developed nations who are telling the left side to stop emitting so much greenhouse gases. o Right side argues that we've been where you guys are at and are trying to stop you from making the same mistake. Harden's Law - you can never do just one thing. o There are no easy answers, if you attempt to solve one thing you will create another problem.

COASE THEORM AND TRAGEDY OF THE COMMONS:

Coase Theorem - describes the economic efficiency of an economic allocation or outcome in the presence of externalities. o Trying to get people to talk to one another - The theorem states that if trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property. Making people pay for the costs they impose on their neighbors. Tragedy of the Commons - how we manage things that inherently has to be shared like air and water, oceans. o The depletion of a shared resource by individuals, acting independently and rationally according to each one's selfinterest, despite their understanding that depleting the common resource is contrary to the group's long-term best interests. The concept is often cited in connection with sustainable development, meshing economic growth and environmental protection, as well as in the debate over global warming. o In a commons, everyone will come in and rationally maximize their use of the common good. (People are externalizing the commons). Only one person is getting the benefit but the problem is externalized to everyone who is suffering. o Basically, people that are using a commons may use too much to the detriment of others

PRECAUTIONARY PRINCIPLE:
"In order to protect the environment, the precautionary approach shall be widely applied by states according to their capabilities. Where the threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation." o If you can you have to take precautions. o Good for technological development - pushes deadline for future emergencies now, so we can develop ways to solve future problems to prevent future emergencies. Because we are good at saving our own ass when under stress. Uncertainty is not a reason for inaction.

HOW DOES THE LAW ENCOURAGE MITIGATION OF CLIMATE CHANGE?

Domestic Climate Change Law: o Clean Air Act: EPA sets up air quality standards (how clean the actual air is supposed to be (not the emissions but the air itself), then delegates the responsibility to the states to figure out how to meet those standards. o Establishes the power of the Federal govt to regulate emissions from mobile sources. (Title II)

Establishes power of Federal govt to regulate emissions from stationary sources. (Title V) Non-Attainment areas: areas that meet the EPA standards Attainment areas: areas that do not meet the EPA standards. What type of permit you get as a stationary source depends on whether or not you are in an attainment area. If you are managing a place that has a giant smoke stack that is spewing shit into the air you need a Clean Air Permit. Up to the state how they want to implement it, the actual laws and shit of how to meet the EPA standards is up to the state. o Chevron Deference If the statute is unambiguous the agency must do what the statute says BUT if the statute is ambiguous then the court will defer to the agencys interpretation as long as the agency is reasonable. Chevron TWO Step: (1) Is the statute ambiguous? o If Yesgo to step 2. o If Nodo what the statute says. (2) Defer to agency unless the agency is doing something crazy and unreasonable. o Hard Look Review: In the US Administrative Procedures act that says agencies cannot do things that are (1) arbitrary and (2) capricious. (abuse of discretion) Even if you defer to the agencys interpretation but the interpretation is arbitrary and capricious (abuse of discretion) the court will remand it back for the agency to do it again. o Hard Look Review vs. Chevron Deference: If the agency fails under Chevron then everything the agency has done is dead. If the agency fails under Hard Look Review then the court just remands and says do it again. Regulation of Greenhouse gas emissions o Clean air act: Massachusetts v. EPA (2007): EPA can or must regulate GHG under the CAA. EPA does not want to do this now. o IN the past it did but then took it out of the definition. Ct: says that EPA may regulate GHG not must regulate GHG. EPA cites to Brown and Williamson v. FDA o FDA stepped in and said they were going to regulate tobacco, says tobacco is a drug therefore they can regulate it. Court says that you cannot just regulate tobacco is because tobacco has a unique political history. If Congress had meant for FDA to regulate tobacco they should go ahead and say that FDA may regulate tobacco, the FDA may not just step in and regulate it. If Congress wants FDA to regulate it is fine, but they have to say it. o Supreme Court in Massachusetts decision says that tobacco has a unique political history and it is NOT the same as GHG. o Chevron Deference as applied in Mass v. EPA: If the statute is clear then the agency must follow the statute. If the statute is unclear then it is deferred to the agency. Is the agencys interpretation arbitrary and capricious? Post Massachusetts actions by EPA: o Endangerment Finding Dec. 2009 that says that the six main GHG are air pollutants. (now text in statute) EPA says that they were compelled to do this by the court. Lots of people say that they had a choice. o Tailoring Ruleif we followed the statute of CAA and EPA follows the 100-200 tons of GHG rule which requires anything stationary that emits that much GHG to get a permit they would require almost everything to get a license. EPA claimed administrative necessity. What it essentially means that if EPA followed the rule it would be so crazy that we are allowed to disregard the statute.

o o o o o o

Court text for when you can claim administrative necessity when complying with statutory language results in absurdly and injustice so monstrous that all mankind would, without hesitation unite in rejecting the application because it shocks the moral or common sense. o Does not apply when the agency can just avoid the absurdity. o GHG Reporting Rulenow if you emit over 75,000 tons then you have to report yearly of what you are emitting and how much you are emitting to the EPA. Vehicle Emissions Standards Why does Oklahoma not have emissions testing? o Because OK is an attainment area, so theres no emissions testing. California Waiver: to regulate mobile sources California emissions standardsince CAF and the Federal govt started regulating GHSs, CA had to amend its standard to meet the federal standards. Western States Climate Initiative. o Western states and a few Canada provinces have jointly regulate GHGs. o Elinor Ostromis it better to regulate commons problems at the local level or the broad level? Somethings are easier to regulate at the regional level. Harder to have an impact because it is only regional. National Climate LegislationGood or bad? o Cap & Trade vs. Carbon Tax: Cap & Trade: Cap and trade is an environmental policy tool that delivers results with a mandatory cap on emissions while providing sources flexibility in how they comply. Successful cap and trade programs reward innovation, efficiency, and early action and provide strict environmental accountability without inhibiting economic growth. o Examples of successful cap and trade programs include the nationwide Acid Rain Program and the regional NOx Budget Trading Program in the Northeast. Additionally, EPA issued the Clean Air Interstate Rule (CAIR) on March 10, 2005, to build on the success of these programs and achieve significant additional emission reductions. Carbon Tax: A carbon tax is usually defined as a tax based on greenhouse gas emissions (GHG) generated from burning fuels. It puts a price on each tonne of GHG emitted, sending a price signal that will, over time, elicit a powerful market response across the entire economy, resulting in reduced emissions. It has the advantage of providing an incentive without favoring any one way of reducing emissions over another. By reducing fuel consumption, increasing fuel efficiency, using cleaner fuels and adopting new technology, businesses and individuals can reduce the amount they pay in carbon tax, or even offset it altogether. Rising concern particular those in the energy industry that says now is the time for broad climate change legislation. Why would people in the energy industry now push for national climate change legislation? o Certainty o Uniformity o Hatred of the CAA as being the vehicle of it. Required title 5 permits for stationary sources. Permits are time consuming. o They cant help the GHGs being regulated so they would rather have it be done some other way then CAA. o Then again, some would prefer CAA because it is the devil they know. Why would you prefer Cap and Trade: Get all the efficiencies of the market pricing mechanisms with Cap and Trade. Why would you rather Carbon Tax: Could guarantee lower levels.

Either it will be regulated under CAA, or regulated under Cap and Trade or Carbon Tax. Cost-Benefit Analysisdifficult thing is every time you come up and say x does this and does not do this, but the alternative to how expensive something is, it is not as bad as THE END OF THE WORLD!

HOW DOES THE LAW ENCOURAGE USE OF RENEWABLE ENERGY SOURCES?

The Waxman-Markey American Clean Energy and Security Act billrequires for all electrical generating facilities to get 20% from renewables provide subsidies for renewables and 17% emissions reduction from 2005 levels by 2020. There is an abundance of well-developed legal instruments through which the govt can promote renewable energy, particularly at the state and local levels. o Main Govt Incentives: 1) Tax incentives (including corporate tax, personal income tax, sales tax and property tax); 2) Grant incentives; 3) Loans incentives; 4) Rebates; 5) Industry recruitment incentives; 6) Leasing/Purchase incentives; 7) Production incentives; 8) Public benefit funds; 9) Green power purchasing policies; 10) Renewables portfolio standards; 11) Construction and design policies; 12) Net metering rules; and 13) Generation disclosure rules. o Major Federal Laws and Provisions: Solar Energy Research and Development Act of 1974, encouraging the use of solar energy; Geothermal Energy Research Development and Demonstration Act of 1974, enhancing geothermal use; Biomass Energy and Alcohol Fuels Act of 1979, providing incentives for alternate, renewable fuels; Energy Tax Act of 1978, encouraging investment in solar, wind technologies and other environmentally friendly energy technologies through the use of tax credits; Wind Energy Improvement Act of 1980, providing incentives for development of wind energy systems; Geothermal Energy Act of 1980, providing incentives for increasing production of geothermal energy; Renewable Energy and Energy Efficiency Technology Competitiveness Act of 1989, promoting research, development, demonstration, and commercial application of renewable energy and energy efficiency technologies; Energy Policy Act of 1992, in particular Subchapter VRenewable Energy, promoting increases in the production and utilization of energy from renewable energy resources; further advances of renewable energy technologies; and exports of U.S. renewable energy technologies and services.

HOW DOES THE LAW ENCOURAGE ENERGY EFFICIENCY AND CONSERVATION?

Sustainable Development - (not binding international law) you can use as much energy for production and do what you need to do to get energy as long as you do not jeopardize the future generation's ability to use energy.

Some are arguing that we need the energy now, it's expensive to keep shit as is now for future generations when there are people who need jobs, energy, food, etnow. Need to treat everyone in our generation equally. Energy conservation refers to efforts made to reduce energy consumption in order to preserve resources for the future and reduce environmental pollution. Conservation can be understood in two distinct senses. In the first sense traditional conservation means the use of fewer nonrenewable natural resources. The second sense in which conservation is used is to increase energy efficiencies, such as increased fuel efficiency for vehicles or in-home heating. The National Energy Conservation Policy Act is directed towards conservation in both senses. o The Energy Policy and Conservation Act of 1975 was enacted for the purpose of serving the nations energy demands and promoting conservation methods when feasibly obtainable. o The Energy Policy and Conservation Act was amended[i] to:

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grant specific authority to the President to fulfill obligations of the U.S. under the international energy program; provide for the creation of a Strategic Petroleum Reserve capable of reducing the impact of severe energy supply interruptions; conserve energy supplies through energy conservation programs, and the regulation of certain energy uses; provide for improved energy efficiency of motor vehicles, major appliances, and certain other consumer products; provide a means for verification of energy data to assure the reliability of energy data; and conserve water by improving the water efficiency of certain plumbing products and appliances. The Energy Policy Act of 1992 required the Secretary of Energy to conduct various programs to: improve energy efficiencies; increase the use of renewable energy; reduce environmental impacts; and foster economic growth. The Energy Policy Act authorizes research and development programs for improving efficiency in energy-intensive industries and industrial processes[ii]. The Alternative Fuels Act of 1988 amended the Energy Policy and Conservation Act to pursue the use of alternative fuels. The amendment encourages the development, production, and demonstration of alternative motor fuels and alternative-fuel vehicles. Alternative fuel means any fuel not derived from petroleum. Alternate fuel includes ethanol, methanol, natural gas, liquefied petroleum gas, hydrogen, and electricity. Additionally, the Energy Policy Act of 2005 contains a provision to reduce industrial energy intensity. The Act requires the Secretary of Energy to conduct programs of energy efficiency research, development, demonstration, and commercial application. The Act allocates funds for establishing and conducting energy efficient appliance rebates and pilot energy efficiency programs. Additionally, the Act develops pilot programs for energy efficiency in lowincome communities.

Energy Conservation & Efficiency: o Cogeneration Use excess heat for the facility. Also called tri-generation. o Hybrid plants Use both renewable and non-renewable energy. o Green Building Codes Standard that requires your building to be energy efficient. LEAD Certification ISO 14,000-Audit environmental performance o Nudge regulation and choice architecture Make doing what you want people to do easier and what you want them to do harder. Ambient balls 3 Types of Efficiency. Cost Efficient-Feasible financially Energy-Getting the same results with less energy. Economicnot cost efficient. Goal is making the people better off. Net social gain and net maximization of social utility. o Utilities are exempt from antitrust and allowed to have a monopoly. o Two part test adopted: Where the state has shown a clearly articulated policy to replace competition with regulation AND State has significant oversight when youre exempt from anti-trust Theoretical Background for Energy Policy o Public Trust Doctrine: Theory that some natural resources are owned by the state and held in trust for their citizens and citizens only have usufructuary rights. State holds certain natural resources for the use of citizens. Government gives individuals a Usufructory Right. Usufructory Right-The ability to use a public good. State can regulate how the resource is used. Like rivers.

Public Choice Theory Basically an explanation as to why things dont work in a democracy. Individuals may have a problem with something but arent able to get individuals together to do something about it. Rent Seeking-Not necessarily public choice theory.

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NEPA & ESA CONSULTATION:

NEPA & ESA CONSULTATION:

THE NATIONAL ENVIRONMENTAL POLICY ACT (NEPA) AND ENERGY:

Speaking the NEPA Language:
NEPAapplies to all Major Federal Actions: (includes but not exclusive to just) Licensing Energy regulatory commission Licensing the Nuclear Regulatory Commission Rate-setting by FERC Clean water act permits Clean air act permits Land transfers from public land Royalty agreements owned by state

Not overseen by EPA, overseen by the Council on Environmental Quality (CEQ) sets regulations on how to get through the NEPA process. NEPA Process: an information forcing procedural regime. o All NEPA does is require the Federal govt before it engages in a major action to go through the process of thinking of the environment. Does not have a substantive component.

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Example: we want to build the deathstar and blow up the world then everyone can live on the Deathstar. NEPA does not prevent this all it does it forces the federal govt to think about the environmental consequences that would come with building a deathstar, send in comments and feedback. Then if the federal govt wants to blow up the world anyways, they can. How NEPA worksthe language (CE, EA, DEIS, FEIS, ROD, and FONSI): o Step 1: Categorical Exemptions (CE)a major federal action to which NEPA does not apply. Each agency has its own CE. Common CEs: Installation of utility facilities on public right of ways. o If you want to lay wires or cable or pipes on a public right of way (along a street). Approving safety plans. o OCEA and MSHEA safety plans. If that Major Federal Action does not fall into CE then it moves on to EA o Step 2: Environmental Assessment (EA)this stage the agency is seeing if there is will be any significant environmental impact from the proposed action. (Scoping process) Lots of investigations with scientists and smart people After the either get: (1) FONSI or (2) EIS o Step 3: Finding Of No Significant Impact (FONSI)it means you are off the hook, youre done. Youre good. Step 3(a): Environmental Impact Statement (EIS)essentially describes all the environmental impacts that the project has and all the alternatives that you could take to avoid the environmental impact. Not required to pick the best alternative in the EIS.

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o You can pick the worse alternative if you want or o Just choose to not do the action at all. o You dont have to pick the best alternative but you have to give the alternative. o Step 4: Draft Environmental Impact Statement (DEIS)subject to public notice and comment, the agency will propose the EIS, and everyone in the public can criticize/give feedback. The agency comes back and fixes, polishes the EIS, and responds to public comments and publishes an FEIS o Step 5: Final Environmental Impact Statement (FEIS)This is after the public comments and responses and feedbacks, the final version of the DEIS. o Step 6: Record of Decision (ROD)is published with the FEIS (volumes big, includes all the testimony, reports, comments, EVERYTHIGN involved in the EIS process) How it works in practice? o As you are negotiating through the NEPA process, whatever (industry group) non-governmental agency is involved is constantly negotiating with the agency to do this and that. If the agency does not comply the group could sue the company for this and that and hold up the NEPA process. But if you tweak it as proposed we wont sue and well back up. A bunch of back door deals and negotiations. For your client you need to get to these things early and often to make sure it benefits or fits for your client. What happen in the ROD are not all the important things, just all the important official things.

Substantive Impacts (MOUs & MOAs) Memorandum of Understanding (MOU)a contract/agreement between the state and the private party interested in the NEPA process. If you are owner of a coal mine and you are interested in the NEPA process and you are talking with the govt, there are a lot of things the govt wants you to do but cannot officially make you do by statute but in order to get the NEPA process moving and get the NEPA process expedited, you agree to do x or y in order to speed up the NEPA process to get whatever permit you may want. It is in the ROD Substantive legal obligations Memorandum of Agreements (MOAs)the same as MOUs but between governmental agencies, whether state and federal, state and state, or federal and federal.

State Version (CEQA) State version of NEPA (California Environmental Quality Act [CEQA]). o Be sure to check the state youre in that theres not a state version of NEPA

Segmentation and Cumulative Effects:

Thomas v. PetersonNo Segmentation! o NEPA only applies to MAJOR actions, you cannot break down MAJOR actions into a bunch of minor actions to avoid going through NEPA. o Problem is sometimes it is hard to know if you are segmenting. o How do you know when you are segmenting? Connected Actions and Cumulative effectsactions which automatically triggers other actions or which cannot or will not proceed unless other actions are taken previously or simultaneously or are interdependent parts of a larger action and depend on a larger action for their justification. Piedmont Environmental Council v. FERC o FERC determines its a national interest through notice. o FERC must make rates reasonable, just, and non-discriminatory. o FERC can regulate interstate line setting when there is national interest, interstate interests involved, and when state authority lacks authority or have authority but withheld authority for a year. o Withholding approval definition Denying a permit counts as withholding. o Takeaway

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FERC can jump in when there is national interest, interstate interests involved, and when state authority lacks authority or have authority but withheld authority for a year. Withhold=sitting around for a year, not denying. A lot of discussion about NEPA

The Endangered Species Act (ESA) Section 7 Consultation and Energy:

Background on the ESA:
Every single Federal Action has to go through informal consultation on endangered species. o When you do shit you have to check with the Fish and Wildlife to check if there are any endangered species in this area or critical habitat. o If there is then as part of NEPA you have to prepare a biological assessment. Which essentially just says if there are endangered species or habitat are we going to harm them? If the answer is Yes!!then fish and wildlife will write a biological opinion, in this opinion they can impose substantive obligation (they can make you do shit, this is without MOUs or MOAs) through the law. They can just write a biological opinion to tell you what to do. Endangered Species Act (FWS and NMFS): o Listing of species and Critical HabitatSect. 4 They are protected by the ESA o Prohibited TakingSect. 9 (Incidental Take AuthorizationSect 10) Against the law to take anything on the ESA list. Unless you have an incidental take permit (which are really hard to get) Taking means Harass Harm Pursue Hunt Shoot Wound Kill Trap Capture

Collect. Similar to torts but-for proximate causation.

Southwest Center for Biological Diversity v. U.S. Bureau of Reclamation (1998)

Section 7 Consultation and Citizen Suits o If a state or fed is not taking action for a violation of an environmental statute, citizens can sue and can act like private Attorney General. o You have to give the agency a notice then the agency has 60 days to fix the problem. o If the agency is doing what they consider diligently prosecuting then you cannot sue them.

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WATER LAW:
WATER RIGHTS:

Navigation:
GENERAL The government owns all the water, but for non-navigational waters may grant private individuals, companies, non-state entities usufructuary rights. o Usufructuary rights the right to use water from a stream in order to generate electrical power. Such a right is distinguishable from a claim of legal ownership of the water itself.

Navigation Servitude: all navigable waters have a navigational servitude by the federal govt which means the Federal Govt can come in and build ports and improvements on the body of water to improve navigation without it counting as a taking of your land. If you have land that abuts a navigable river and the federal govt shows up and builds a port on your land they are not taking your land, you bought the land that is burdened by a Navigable servitude.

Now if you can prove that it is not navigable water then you can sue for taking. The Daniel Ball: the case that defined navigable. Navigable The Daniel Ball (1870) Federal Definition: Those rivers must be regarded as navigable rivers in law which are navigable in fact when they are used, or are susceptible of being used, in their ordinary condition, as highways for commerce, over which trade and travel are or may be conducted in the customary modes of trade and travel on the water. And they constitute navigable waters of the United States. o Navigability is legal, not technicalmust meet this legal definition not technical definition for a body of water to be qualified as navigable. o Navigability is defined at statehoodit does not matter if the river is or is not navigable now, but whether or not that segment of the river was navigable when the state which it resides in became a state. o Navigability is determined by segments and portage (the practice of carrying water craft or cargo over land, usually areas that are not navigable) defeats navigability. Just that segment would be non-navigable.

Equal Footing: When any state joins the union, it joins the union on equal footing with the 13 original colonies. The Federal govt holds the beds and banks and rivers in trust until the territory/state joins the union then the territory/state becomes a state then the state will take control of all the navigable rivers, the Federal govt (trustee) are not allowed to sell the beds and banks of rivers while it is in trust. o The Federal govt may not sell/trade these water ways except: EXCEPT: if it is part of treaty negotiation to settle dispute with a foreign country it cannot sell the bed/banks river that is in trust. o Individual citizens can own bed and banks of any non-navigable water, but NOT navigable water. Why would citizens want to own bed and banks on non-navigable water? Lots of mining done in the bed and banks of rivers. A lot of oil and gas can be found in bed and banks of rivers.

Boundaries & Beds:

Two ways to determining boundaries on the river: OWHM vs. ad medium filum aguae

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Navigable rivers: o Are owned by the state so the boundary is the OHWM itself because the states own the beds & banks themselves. o Ordinary High Water Mark (OWHM)where the water is normally high on the river. Non-Navigable rivers: o OWHM(MINORITY) some states have the boundary at the midpoint of the OWHM. Divide the OHWM in two and depends on some states that is where the boundary is. o ad medium filum aquae (MAJORITY) the thread of the stream; you dont pay attention to the OHWM for the boundary purposes, you pay attention to what the middle point of the actual stream is (OKLAHOMA RULE). Only for non-navigable; still use OWHM for navigable rivers.

When we are talking about the bed and bank the water body (the actual land of the water body) State owns all navigable waters. Private parties can own the bed/bank of non-navigable waters. Bed and banks are important because lots of oil and gas are found in river beds.

Accretion: gradual and imperceptible buildup of sand and sediments on the river. The person who owns the property gets the accreted land. o If your land gets bigger because of accretion then you get the land.

Avulsion: Sudden (flood, or natural disaster, or artificial disaster) that creates a new channel, so what happens to the boundary lines? It stays marked by the original river bed (even if it went dry). Legal presumption for accretion; it is your burden of proof to show that it is avulsion. o Even if it is not gradual and imperceptible court will assume that it is accretion. Under avulsion you may lose your water, but you dont lose the boundary of your property.

Dereliction: the receding of water Same rule as accretion.

Erosion: you get benefit of land from accretion as you lose land with erosion.

Theories of Water Rights:

Riparian Rights: common law of water rights still largely in use in Eastern States, saying owners of riparian land have right to reasonable and beneficial use of water; Kundel Farmsdefined two types of use of the water: (1) natural and (2) artificial o Natural Riparian rightsyou own the land that abuts the river; you own the rights to the water. Riparian use doctrine you can take as much as you want for natural use. (no limit) Natural useCLfor basic watering, irrigation, domestic uses (for your needs) If you can argue that what youre using your shit for is natural then you can use as much as you want. If you are in an area that is normally grown x crop then growing that crop is natural (rice in one place is natural; rice in another place is artificial) In this case if they could have argued that there was a wetland and the wetland ended because people did something to end it and you were just restoring the wetland backthen it is natural; If there were droughts/if the wetland ended naturally and you just decide to bring it back by diverting water back into there, then it would be artificial use. o Artificial (not natural) once you decide that it is artificial there is a LIMIT on how much water you can use. How much can you use? Natural Flow vs. Reasonable Use

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Reasonable Use: (1) be equal as near as possible; (2) no use may injure the property of another; (3) use must be adapted to the character & capacity of the stream; and (4) use must permit waters to flow so as to allow beneficial downstream use. (MAJORITY) Natural Flow: You can use as much as you want as long as you do not interrupt the natural flow of the river. (MINORITY)

The Sticky Stick: o You cannot own property and convey the riparian right. You cannot just transfer riparian right while still owning the land. o Source of Title & Unity of Titlewho owns the riparian right? Source of Title: the person/original owner of the land that abuts the river, if you own the tract right behind that land. You do not own the riparian right. The Riparian right stays with the original plot of land, so determination of usage of water under reasonable use would be determined according with the original plot of land not considering any future expansion of land even if contiguous. (MAJORITY) Unity of Titleallows for the Riparian rights to be expanded if the expansion of land is contiguous. (MINORITY) You can expand riparian rights by buying continuous properly. Foreclosure of Future Use: o Most battles in Riparian rights system it is the downstream person who is mad at the upstream person. o But upstream person could be mad at a downstream person if: When the downstream person enters in the land and uses so much of the water that virtually any use upstream injures their property or does not allow for their beneficial use. Because the downstream uses so much it forecloses the future use of upstream river. o Example: The Nile. Egypt has been Monopolizing its use so any use of the water upstream from other countries would hurt Egypt so they start to bitch and whine.

Prior Appropriation Rights: is a more recent creation in the arid Western States, where water rights are determined in a first-in-time, first-in-right manner, and based on a set quantity. Original Doctrine: (1) demonstration of intent to appropriate; (2) diversion of water from watercourse; & (3) application of water to beneficial use. o Modern Innovationsmakes it more like a secure transactions now. You go to the state agency to file for a permit to divert the water: Explain to the state agency all the details of how, what, why are you prior appropriating the river. Then the state allocates x amount of water that you can use after issuing you the permit. Then there is a public notice so everyone in the state knows that youre about to come and use the river. Then usually a big public meeting where everyone fights for why you shouldnt be allocated that much or should be using the river at all. Then the state reissues you a new allocation of water and thats actually how much water youll be able to use. You do not have to own the land that abuts the river, you just have to get there first to claim the Prior Appropriation right. The water that they take typically dates back to when they first filed. o Example: A appropriates in 1890 B files to appropriates in 1895 C appropriates B perfects. B has priority over C because B filed first. Diligence and Relation Back: If you start to use it, but then you stop for whatever reason, and someone else comes in and perfects appropriation. o If I file for an appropriative right but do not follow up on it for a while then my priority date is not of filing but when I went back and did something with the appropriative right. o Priority date is typically date you file, as long as you work diligently.

Forfeiture v. Abandonment Prior Appropriation right: if you do not use your water you lose it.

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Riparian system: if you own land that abuts the water and you choose not to use it, thats your prerogative, and you can do what you want. Forfeiture is statute; x years of non-use is forfeiture. Abandonment is CL must have intent to abandon water right.

Call on the River: If there is a shortage, anyone of the appropriative right holders on the river OR the director of the river (OKLAHOMAOWRB). Technicallyit is general streamage litigation. (Everyone sits down and starts suing each other.) o In Practiceit is an invitation to negotiate. o In the real worldeveryone negotiates a deal the downstream appropriation right holders will try to negotiate with the more senior upstream appropriation right holders to try to settle on some cash value for x amount of water Buying the more senior upstream right holders rights. Futile call doctrinewhen they negotiate a deal for the ones towards the very end of the stream and they negotiate a deal for water but in order for them to get water more water needs to be expensed to push the water that far (typically during a low rain/drought season) and even if it were to use the extra water probably a little if not only mud would trickle down that far so for those downstream to get their water would be at the sacrifice of the appropriation rights of all those upstream from him. Would not happen, they would just go fuck it youre not getting water. (USUALLY happens during a state regulation commission meeting the state agent would say it is a futile call.) Water quality and Water rights are typically treated as two different things even though they are not really are that different. o Water Quality is typically controlled by the Federal govt (Clean water act) o Water Rights are usually controlled by the state govt

Hybrid: A little of both OKLAHOMA is a Hyrbid State. 1890 OKLAHOMA went to Riparian rights state. o By 1897 OKLAHOMA enacted some prior appropriation statutes. You needed permission from the Riparian land owner to use the water. But you could still get prior appropriation rights. o By 1963 OKLAHOMA new statute abrogated Riparian rights in OKLAHOMA (More or less abandoned. Riparian owners were left with a diminimus amount to use for their natural use. Could also have 2 years worth of storage of these diminimus amount. BUT NO artificial use. o Franco American case the SC of OKLAHOMA held that the 1963 statutes that eliminated Riparian rights in OKLAHOMA were unconstitutional. Declared as Unconstitutional taking. Technicallythe case has not been overruled. The OKLAHOMA legislature reenacted the 1963 statutes with a few amendments. In PracticeOK is a prior appropriation state but technically it is a Hybrid states because there are still Riparian rights.

Groundwater Rights:
Two types: Reasonable use & Correlative Rights Reasonable Use: You can use as much of the groundwater as you like as long as it is reasonable and does not interfere with your neighbors ability to use. Disputes typically over well space and well pressure. o Cones of depression. OKLAHOMA and most states have a bifurcated system (water and groundwater rights are two separate things). o Bifurcated Systemssurface and groundwater are treated as two separate entities. With groundwater usually it is whoever owns the surface owns the groundwater. With Surface water it may or may not be who owns the land, with apportionment states it is whoever apportioned first. Problem is we never know if we are taking surface water or groundwater.

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Question when you are appropriating: which water are you taking? o If you are appropriating sub-flow then you are appropriating surface water. o If there is an aquatard then it is simple, if you are sucking water above the aquatard then you are looking at surface water, if below then groundwater.

Correlative RightsOKLAHOMAthe amount of groundwater that you can use is correlated to how much land you own. Issue these days because of fracking. Before it made sense that if you had a lot of land you needed a lot of water for irrigation, but now fracking does not take that much land but requires a tremendous amount of water.

American Rule vs. English Rule English Rule(TEXAS) only state to follow English Ruleground water is occult, its mysterious, you never know if one persons use of groundwater is hurting another persons use of groundwater therefore you get to use as much as you want. American Ruleuse your groundwater reasonably to not injure your neighbors (better technology so we have a better understanding of what is going on underground.) Cone of depression: Two people with two wells and the Cones overlaps/intersects and wells lose pressure.

Tribal Rights:
Winters Doctrine: When the United States makes any type of reservation, they make a reservation implicit within that reservation; it has reserved enough water the minimum amount of water to meet the primary purpose of the reservation. What is the primary purpose of a Tribal reservation? o To establish a permanent homeland. How much water does that take? A shit ton. Practically Irrigable Acreage (PIA) how we determine how much water is needed. o How much of the land held in reservation to the tribe can be practically irrigated given economic and technical feasibility. o Works similar to correlative rights. o Some tribes like it, because they have a shit ton of land. o Some tribes that hates it because they have Natural gas and they need more water for fracking. o Supreme Court standard is PIA. But there are a few instances where PIA is NOT being used. o MacCarran amendmentallows the Federal govt including tribes to be dragged into state stream adjudication. Important because tribes are worried that the states would favor/prioritize their own appropriations instead of the tribes. (Especially if the officials are elected.) Technically PIA should be used when it comes to tribal adjudications because it is Federal. Tribes typically do not want as much water as they are allocated; they rather have support to build a system of infrastructure. No point having so much water if they cannot efficiently use it. This is why tribes do not appeal that it should be federal law.

Gila River adjudication & Tribal Groundwater implicit reservation means groundwater rights NOT just surface water rights. SUPER WATER ADJUDICATION.

Interstate Water Apportionment:

State apportioned water in one of 3 ways:

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1.

2.

3.

Equitable Apportionment (Supreme Court Original Jurisdiction) a. Done by USSC. b. A form of CL and is a fucking mess. c. Usually just a way for the Federal govt to scare states to use one of the other two ways. Interstate Compact: Tarrant decision a. States that share river get together and negotiate a compact (agreement of how to share the river) b. Congress HAS to ratify it. c. What kind of law is this? i. Not state law but not really federal law. ii. Preemptiondoes the compact preempt (as federal law) state law? 1. Raises question of whether compact is federal law. d. Tarrant Oklahoma wins. i. States can set up protectionist measures against other states to protect its own water. ii. Dormant commerce clause says that states cannot set up protectionist measures. 1. Reason why OKLAHOMA can do it because of the state police power. 2. Exception to Dormant commerce clauseit claimed it under public health and welfare and this falls under state police power. 3. Cannot take OKLAHOMA water across state lines. iii. We dont need to get to DCC clause issue because Texas never asked to take account of how much water is available. Congressional Apportionmentwhere congress passes water that apportions the water.

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HYDROELECTRIC POWER:
HYDROELECTRIC POWER:

Mills and Property Rights vs. Energy Development:

Fisk v. Framingham: canals, mills, and flooding
o o Facts: B builds a dam on the river, and this resulted in flooding of As land. Mill statutesays that you can build a dam and flood your neighbors land however as long as you are flooding their land you have to pay them a yearly fee. As long as the fee is being paid then you are golden. Do not have to worry about flooding your neighbors land. Why would we have this statute? Because when you have big agricultural areas and one of the limited type of energy was run of the river energy you want to encourage development of a water mill. Public Use. Courts eventually held that it only applies to water courses does not apply to canals. Trying to push away from early use. Most of these mill statutes are still on the books.

Dams and Federal Agencies:

How to evaluate any dam? How much of it is a public use? How much of it is a private use? o Courts tend to want to push damn building into the federal region, they would prefer the federal govt to be able to build and manage the dams. Easier to say that a dam is for public use than a private use if the govt builds it and not a private company.

U.S. Agencies & Dam Development:

Bureau of Reclamationone of the major bureaus that builds and manages dams. o Not quite as powerful in OKLAHOMA as it is in other states. o Tasked with reclaiming the dessert and making it productive. U.S. Corp of engineers runs some of the biggest dams in the United States. o One of the major agencies for running dams, you cant fill up a canal without permission from them. o Runs all the dams, Must get a permit from them to fill a river. (to make a dam) Tennessee Valley Authorityquasi corporate quasi-public company; runs dams across the Tennessee valley o Issues construction permits Federal Energy Regulatory Commission (FERC)regulate rates for all interstate electricity transmissions, purchases, and sales for licensing LNG and for licensing Dams, probably most powerful company in the US for energy development. o Headed by 5 commissions. o Staggered terms; independent from the president. o Self-funded not by tax payers money. o Independent from Congress. o All three operate independently from each other and from FERC, FERC does not license them!!! o FERC is the successor of the Federal Power Commission (FPC).

Licensing & Jurisdiction:

Udall & Fairfax County o Highwatermark of the hard look doctrine anything that an agency does is subject to arbitrary and capricious review. o So if an agency is behaving in a way that is A&C, the court can remand it for them to reconsider. The way they do this is to make the company do a procedural hard look review. o Procedural hard look reviewmake them go back and say did you look at everything you were supposed to look at.

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Statute could command the company to look at x y and z and if the company did not look at z then the company is being arbitrary and capricious. o Company cannot be blatantly unreasonable. o Facts: private party was granted a FERC license; private party was going to build a dam on the river. Bureau of Reclamation says we are the one that should get the license, not the private party to build a dam. Goes to USSC and USSC says they did not give it a hard look. o Hard look review very rarely overrules an agencies decision, most of the time it just results in a remand. o Used to be preferences for municipal power development, since the EPCA (electric protection consumer act) these preferences have been done away with. In an attempt to create an even playing field between govt and private companies. FERC licenses nowadays still usually goes to govt because of the old belief that we would like the dams to be for public use & there are so many dams in the country and most are owned by the govt so we would like to keep it in one entity for better or for worse. o Licensing (Udall) A cost over FERC licensing. Agency didnt give a hard look over everything. Is the river navigable issue raised? Build a damn in a navigable river then you must get a license. Takeaway-Agency will find a way to get involved through jurisdiction. Test: any relationship between project and interstate commerce. Jurisdiction: (1) navigable waters, (2) to the fullest extent of Congress commerce power (basically a relationship between the damn and interstate commerce). Scenic Hudson Preservation Conference v. FPC o Dam Licensing and the environment. o Facts-Association challenged FPC for granting a license to build a dam on the Hudson River. Expert said to consider a gas turbine alternative. FPC issued ten paged document saying why the damn shouldnt be built. o Takeaway-Even though the statute may be vague, the dam must be for the public interest and adapted for management of waterway. o Also represents how environmental agencies get involved. o Pre-NEPA; Pre-FERC o When to give a dam license? It has to be used in the public interest AND The dam has to be best adapted to the comprehensive plan to the management of the waterway. Agency has a lot of discretion. References recreation o Ctsays means beauty and fishing and whether or not it looks nice and you have to consider these things before you can issue a license. o Since this time the ECPA (Energy Consumer Protection Act) has further elaborated when to or to not issue dam licenses. Dam Licensing and the Environment: o FERC LICENSING PROCESS Traditional Licensing process: You apply for a permit and along with that application you submit a bunch of studies that your specialists did on the subject. FERC would then review those studies and materials and then decide whether or not to issue you a license. Then if FERC issue/or didnt issue you a license, then the public would jump in and everyone would argue why or why not you should be issued a license. o If they did not issue you a permityou would argue why they need to. Everyone else would try to argue why you didnt need it. NO LONGER DEFAULT METHOD TO ISSUE A LICENSE. o NO TLP is only applied to grandfathered dams. Integrated Licensing Process: You submit a notice of intent (NOI) to apply for license along with a pre-application document (PAD).

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In the NOI and PAD will include all the research and reasons why you need a dam licensing permit. FERC will take your NOI and PAD and get all the stakeholders and do its own studies and research and get feedback community, environmental protection agencies, federal agencies, and there will have a big workup that will lead to the scoping document. After FERC finishes the scoping document the applicant prepares the study plan. o The study plan is when the applicant prepares with FERC to get all hydrologists will get involved. o All the studies you do post-scoping document will be done in cooperation with FERC. o After you are done with the study FERC summits a Study Plan Determination (SPD) that tells you whether your study plan is actually good. AFTER the SPD is when you submit your application and FERC will either approve or reject you and go through the NEPA process. o Bitching process has just been moved from after the licensing to before the licensing from TPL. Alternative Licensing Program (ALP): When there are private-public partnerships. o When you have a private entity that wants to build a dam and you have a public entity like TVA, or BOR or ACOP who also wants to build a dam theyll strike up a partnership and you go through ALP. Same as ILP but because you are working with a public partner the process is more expedited. Hard to build dams in the country, really hard to build hydroelectric dams most are waste disposal dam and other types of dams. FERC is the licensing for the dam itself. o But to build a dam you need dig and dump stuff into the river (thats where you need the permit from the Army corps of engineers.) Dig in a river dredging Filling a river filling

The Cost & Benefits of Big Dams:

Three Gorges:
You can't do good without doing something bad. o Three Gorges dam in China. o A lot of good comes from building a dam, it will provide for hundreds of thousands of people, but in the process of building a dam you also displace a lot of people off of their land and home.

Tennessee Valley Authority:

Runs dams across Tennessee Valley Built dams across the Tennessee Valley, essentially brought back life through the construction of dams throughout the valley.

Water Security:
The storage of water that dams hold comes in handy during droughts where the water is dispersed. Dams are generally built to secure enough water to contain a 100-year 24/hr. floods. o Only get problems when you get 500-year flood events.

Pros and Cons:

Costs of building a dam: o Thousands of people will have to leave the area (to some, leave their ancestral homeland) o Farmers in the land will have to leave because their land will be flooded. Pros of building a dam: o Farmers who are not living close to the area where the dam is built needs the water that is stored by the dam and requires the electricity produced by the dam, without the dam they will have to move.

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Big Dam Issues:

Sediment Management:
Sediment Transportthe river transports a lot of sediments and rocks and leaves downstream (the river needs this for nourishment). o We dont want sediment build up we want full reservoir capacity. o We want the sediment downstream because it is good for the environment. o How do you transport sediment? You could dredge out the reservoir expensive and you have to find a place to dispose of the dredge material You could do flushing open up the flood gates and push everything downstream. This also exposes toxic sediments and buildups to the downstream river ecology. Causes river gouging. o The dam blocks off a lot of the sediment transport at the head of the dam instead of letting it flow downstream. o The release of sediment stored behind dams can temporarily bury ecologically sensitive downstream habitats, cause flood risks, and/or release contaminants. o Disposal of the sediments prevents downstream reaches from receiving the potential long-term benefits of the released sediment.

Benefit Sharing:
Some regions are good at generating hydroelectric power some are good at producing food or other products the fight is always where to build the dam, benefit sharing is the theory that one region builds the dam to produce the power the other region builds food or other products and barter for energy. o Forces people to build dams where they are the most efficient. o Sells energy (food and water) to each other.

Financing:
World Bank finances dams globally. Public funding o World Bank inspection panel also monitors projects (used for global development)

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PUBLIC LANDS:
PUBLIC LANDS:

The Wilderness Act of 1964:

Managing Designated Wilderness Areas:
The Wilderness Act of 1964sets up a system in which the federal govt can set up a certain amount of land to be protected as wilderness. Lots of natural resources in wilderness areas; once an area is designated as a wilderness area it is essentially taken off the market for natural resource use. 5000 acres or enough land to treat it as a wild area Congress is who designates wilderness A wilderness, in contrast with those areas where man and his own works dominate the landscape, is hereby recognized as an area where the earth and its community of life are untrammeled by man, where man himself is a visitor who does not remain. An area of wilderness is further defined to mean in this chapter an area of undeveloped Federal land retaining its primeval character and influence, without permanent improvements or human habitation, which is protected and managed so as to preserve its natural conditions and which: generally appears to have been affected primarily by the forces of nature, with the imprint of mans work substantially unnoticeable; has outstanding opportunities for solitude or a primitive and unconfined type of recreation; has at least five thousand acres of land or is of sufficient size as to make practicable its preservation and use in an unimpaired condition; and May also contain ecological, geological, or other features of scientific, educational, scenic, or historical value. Allows you to take these big chunks of land and sets them out for preservation. People usually dont care when you declare places like National Parks or Critical Habitats wilderness. Forestry Service: Did Roadless Area Review and Evaluation (RARE) It did stuff to see how much of their land fit under the description of wilderness. They didnt want to reserve ALL OF THE LAND What is the point of reserving wilderness? Science exploration Natural Beauty Federal Land Policy Management Act of 1976says that BLM now need to do a wilderness review. Wilderness Designations: Bureau of Land Management (BLM) had to designate wilderness study areas (essentially going to all their lands to see which land roughly qualifies as wilderness), and BLM would manage these areas roughly as wilderness areas until Congress says one way or another. The wilderness study areas are to be treated as wilderness areas except in the cases of the extractive industries which were there previously and been grandfathered in. Only when Congress designates one way or another will they kick the extractive industries out. For the designated wilderness study areas you have to have a Comprehensive Conservation Plan (CCR) for both wilderness designations and wilderness study areas. Problem is this leads to a lot of public comment and rulemaking, where a lot of tree huggers are complaining that BLM is too conservative with its designation of wilderness study areas and are not covering enough. Wilderness Society v. U.S. Fish & Wildlife Service Could have failed under Chevron deference step one because it is ambiguous. Commercial was not defined.

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ANWR & Wildlife Refuges:

Example of energy issue designated to wilderness. o Shit ton of oil, we want to drill here could reduce our international debt by 2018 by about 300 billion. National Wildlife Refuge and a Wilderness designation. o NWR is managed by Fish and Wildlife. Must manage by its compatibility and purpose of the refuge. Soft release language is it is wilderness for now but well decide on this later, (area 1002) o This is the nature of our management but we might change our mind in the future. Hard release language is this is wilderness and will always be wilderness and nobody will touch it. this is the nature of the land and it will never change. o Most of ANWR is hard release language. Environmentalists say that it is the last pristine area of wilderness in America, shows a lot of pretty nature landscapes. o But thats not the proposed drilling area. The drilling area is remote from those landscapes. o Some compare it to Mars (the drilling area) o Environmentalists rebuts by saying that even if you are drilling in a different area its not only that area that will be affected. Drilling oil brings a shit ton of other crap into the area which will have a devastating effect on the rest of ANWR. o Natural beauty is why we want to keep it But a lot of ANWR is not beauty and once we begin debating beauty arguments become muddled and all messed up.

Bureau of Land Management & the Federal Land Policy Management Act of 1976:
Federal Land Policy Management Act of 1976: a United States federal law that governs the way in which the public lands administered by the Bureau of Land Management are managed. Congress recognized the value of the public lands, declaring that these lands would remain in public ownership. The National Forest Service, National Park Service, and now, the Bureau of Land Management, are commissioned in FLPMA to allow a variety of uses on their land (of greater concern for the BLM, who is the least restrictive in terms of uses) while simultaneously trying to preserve the natural resources in them. This concept is best summarized by the term 'multiple-use.' Congress has to reserve a wilderness but these agencies can make recommendations. o Puts a burr in the saddle of Congress, it elicits action out of Congress that they may have not otherwise done. o If you want it as wilderness, you have to actually designate it as wilderness otherwise it isnt. o Heavy presumption that if something that looks like wilderness ought to be treated as if it was wilderness. o The Federal agencies do the research and recommended to Congress that this area and that area should be designated as wilderness. o Congress then signs that area and designated it as wilderness, the President signs off on it. o The Federal area currently in charge of the area is now in charge of managing that area as wilderness. What does managing it for wilderness purposes mean? Keeping it wild: no commercial enterprises, no permanent roads o Exception: You can have roads and human imprints in there for insect, disease and fire suppression. You can have minimal mineral exploration but it has to be consistent with the natural of the wilderness and for INFORMATIONAL purposes only. Bureau of Land management: Tend to run federal lands with extractive industries. (industries where you are pulling natural resources out of the system) So when they take something off the market, it becomes controversial. o Extractive Industries such as: Energy Mining Timber Fishing o Everything the BLM has is usually considered land that nobody wants.

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Withdrawal Authority:

FLPMA Withdrawal Authority Agency Mineral Lease Discretion & Withdrawal: o Right of way accessa right of way is not implicit within a mineral lease. You have to negotiate a right of way independent of the mineral lease. Department of Interior has a procedure for negotiating a right of way, and they cannot UNREASONABLY deny you a right of way. Withdrawal Authority & Antiquities Act: o Antiquities Act: allows the president of the US unilaterally authority to designate areas as national monument (treated similar to wilderness) o When the FLPMA came out it essentially rescinded the Withdrawal Authority, but the Withdrawal Authority still exists. o Withdrawal Authority: The constitution technically gives all property management to Congress. Withdrawal Authority exists in only 3 circumstances: Can withdrawal land from any federal statute (Congress says you can do this or that on federal land) President can exempt federal land from those requirements: o For anything less than 20 years for a reasonable period of time to protect resource. o For any withdrawal for over 20 years must be done with congressional approval o Any emergency withdrawal can only be for 3 years. To go through withdrawal authority you have to go through NEPA, A LOT OF PROCEDURE SURROUNDS WITHDRAWAL AUTHORITY. When BLM denies a lot of leases, the courts could say that BLM is doing illegal withdrawal. o Essentially when BLM denies a lease they are essentially withdrawing the land from use. o

Multiple Use & Sustained Yield:

Most federal lands are not wilderness; they are run as a business under Multiple Use and Sustained Yield: Multiple Use & Sustained Yield under FLPMA: o Multiple Use'Multiple use' is defined in the Federal Land Policy and Management Act (FLPMA) as "management of the public lands and their various resource values so that they are utilized in the combination that will best meet the present and future needs of the American people." FLPMA addresses topics such as land use planning, land acquisition, fees and payments, administration of federal land, range management, and right-of-ways on federal land. FLPMA has specific objectives and time frames in which to accomplish these objectives, giving it more authority and eliminating the uncertainty surrounding the BLMs role in wilderness designation and management. Basically means the Federal govt can manage a land for extractive purposes. Often you have Use prioritizations: Federal lands will say this is the way we are managing the land it is managed for multiple uses but we come out and we make a comprehensive conservation plan. Subject to public notice and comments. (NEPAthe agency has to go through this because it is a major federal action, and in the public notice and comments is where the public has a say/complaint on the agency this is where you do it.) o The agency is allowed to ignore the comments. o But if you do not comment or public notice then you are waiving your right to bitch about this agency later. o The courts may strike down the agency action as arbitrary and capricious if they ignore important public comments and notes. o You should ALWAYS make a public notice or comment, and your client should always pay you to do so, this allows for you to raise a complaint later on. o If no one comments on it then no one can really raise a complaint.

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Says these are the priorities of the land and list them in importance to lease important possible use for the land, and the top use is what will drive everything. o Very often it is extractive purpose (mining, mineral develop.)

Sustainable yield Consistent with your multiple use plan. You manage it consistently so that the land can sustain your use of it for whatever purpose you are using it for. Tries to keep the land viable to sustain longer.

Areas of Critical Environmental Concern:

You designate any portion of the lands under multiple use these land as Areas of Critical Environmental Concern (ACEC) o ACEC means that some of the multiple uses are excluded. This portion of the land if is mined or drilled or whatever one of the use on the priority list is that is excluded in the ACEC if that use is done this land may never recover. o Even though most our number one priority is generating revenue from mineral leases, we take this little portion and call it an ACEC and NO MINERAL LEASES. Tool that the Federal govt has to exclude certain regions from mineral development.

R.S. 2477 and Southern Utah Wilderness Alliance (2005):

RS 2477broad grant of right of way access across federal land. o If a state wanted to build a road across federal land they can just do it without federal approval. o FLPMA has done away with RS 2477.

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PUBLIC UTILITIES:
PUBLIC UTILITIES:

Common Law & Public Utilities:

Public Utilities:
What are Public Utilities? o Public utilities a company that is regulated by the govt they provide services such as water, electricity, sanitation, railroad, et(services that deals with public trust resources, essential services, and imperfect markets) o Perfect marketno information asymmetry. Everyone knows the same stuff, very few barriers to enter and exit the market. o Gas stations: debates that there should be a maximum price on gasoline; question is it appropriate for the govt to step in? Do gas stations meet the requirements to be Public Utility systems? PUC Economics: Economies of scale. o PUC have high fixed costs, Variable costs arent as high, and marginal costs are very low. Which means: it costs shit ton of money to build a dam, coal factory, nuclear power plant, and all the distributions, cost a lot of money up front. But the marginal cost of serving 1 more customer is very low which means the more customers you get the more your avg. costs fall. You invest a lot of money up front but the more people you get the more your avg. costs fall, so you want to serve a lot of people that is part of the reason that drives a lot of natural monopolies. High up front cost; chance to have very low avg. costs. Historic Development of Public Utility Laws o Rationale for Public Utility Commissions (PUC) Regulation: When you see extreme imperfections in a market you are more likely to see govt intervention. Further you get from a pure market the more likely that the govt will more likely be get involved. Natural monopolies are the complete opposite from perfect market. Not monopolies because they have to be, it is usually because they probably should be. Typically depending on resources: We want things to be conserved and sustainable; when you have businesses where sustainability and conservation are a central part of the model you are more likely to get govt involvement for pricing. Natural resources Infrastructure resources Tripp v. Frank (1792): determining the scope of the monopoly granted: o Back in the old English days you get grants of non-compete, if you take on these grants then you owe certain obligations, one of which is the duty to serve (you cannot discriminate, must let anyone on as long as they can pay the price). o How far does the monopoly spread? o We want the monopoly to grow because it is cheaper to expand a monopoly than it is to bring about a new competitor because the marginal cost of monopolies are lower than the startup costs for that industry. However, we sometimes want to bring about new competition as to have comparative competition. Balancing this is part of utility law. o The right must be commensurate with the duty. Right cannot be bigger than the duty. o Once you get the monopoly, youre not allowed to discriminate. o It takes so much investment to start up and operate a public utility, and it is such an integral part (necessary for the public), that the govt incentive for a company to come in and start investing i n a public utility is the right of monopoly. o Even though there are severe limitations for competition in a natural monopoly, it is not perfectly limited. We still want to encourage at least for comparative purposes some degree of diversity in our public utility.

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Duty to Serve, Reasonable Prices, Monopoly Power:

Common Law & Public Utilities Sic utere tuo ut alienum non laedas (i.e., you can own property, just dont be a jerk about it) o Use your property however you want to; just do not externalize the cost. Duty to serve: all persons similarly situated in terms of need have an enforceable claim of equal, adequate, and nondiscriminatory access to essential services not undercut by statutes. o You have to serve anyone that comes to you with fair and equitable service. o Quid pro quo between govt and company when granting a monopoly is that the company gets a monopoly while the company may not discriminate whom their customers are. Reasonable Prices: Price you get charged has to be reasonable. o Usually the CL is no longer the cause of action, there are statutes now that you would sue under for reasonable price instead of the CL reasonable price. Monopoly Power: In exchange for all these duties that you are taking on we agree to not let have anyone compete with you.

The Contract Clause:

Proprietors of Charles River Bridge v. Proprietors of Warren Bridge (1837): Competition and impairment of Contracts
Competition and impairment of contracts. Contracts clause provisionin the constitution no state can infringe on contract rights. o State govt cannot mess with your contracts. Is expecting a new monopoly that competes with you a violation of that Kx provision of the Constitution? NOPE. o Allowing the building of the free bridge essentially destroyed the economic value of the toll bridge.. o This could be a taking but the court never got to it. The Kx will be interpreted in favor of the public as long as it is reasonable. Court interpretationif there is an interpretation that is reasonable that can benefit the public that will be the interpretation. We dont want monopolies that go on for long amount of time that might stifle innovation or advancements in science/technology. o We do not inefficient monopolies that are why courts will interpret towards the benefit of the public. This method of interpretation will increase transactions costs, when PUC negotiate these deals they will be very strict and very clear on what they want. o Might drive away investments. For Public Utility grants, the courts will construe the contracts to benefit the public. If you make someone elses property worthless then it could be construed as a taking.

Build Operate Transferessentially what happens here; comparable to Build Design Operate; BOTwe pay the upfront cost, we will operate it until we have recuperated our cost and got the return on the investment that we want, then we will sell it back to the public. State of Mass said, you can build a bridge, operate it until you have gotten back your cost, then you can sell it back to us for x profit. People do this with all kinds of public utility systems.

Due Process:
Munn v. Illinois (1877): Setting maximum prices for the use of private property for a public purpose
Setting maximum prices for the use of private property for a public purpose. Private property once devoted to public use is subject to public regulation. o It is like a car, it is yours to do what you want but once you turn it into a taxi service you opened yourself to public regulation. We do not want lawyers that are so good that in contract drafting they are so careful and cautious that the courts cannot construe in favor of the public and stifle and foreclose beneficial technology. (downside of always construing in favor of the public).

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Compared this case to shoemakers and tailorswe dont want to tell shoemakers and tailors that they are doing public service (in a way that they are subject to public regulations like the grain silos in Munn). o Difference: harder to build giant grain silos than it is to start up a small company to make clothes or shoes. The way technology and economy evolves can result in a new public utility. Policy-Tried to compare to shoemakers and tailors but this isnt a fair comparison. Those are free markets. Essential services may evolve over time. Takeaways o At what point does a service become essential? Clothed in a public purpose? o Public use then public regulation.

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RATEMAKING:
RATEMAKING:

Basics:
Ratemaking Natural Monopolies: when natural monopolies exist, meaning big economies of scale too expensive for lots of people to compete in one area you cannot lay down a bunch of competing pipelines. o Naturally only one person can be there. Without competition nothing keeps prices down. o How do you keep prices down? You rate-make. The govt steps in and treats these natural monopolies as regulated industries and attempts to simulate a market. o Object of rate-making is to get the natural monopoly to charge a rate that they would charge if there were competition. o Cost of service ratemakingagency figures how much the entity is worth, how much it costs to do business, once it figures out all that it tries to figure out a rate of return, the rate of return figures to cover the companies operating costs and a reasonable profit for the company. They need the company to make enough profit to want to stay in business but NOT so much that they are a monopoly. Monopoly poweryou are the one and only producer. Monopsony poweryou are the one and only buyer.

A Basic Understanding of the Economics:

Natural Monopolies, Economies of Scale, Network Economies
Natural Monopoly: is a monopoly in an industry in which it is most efficient (involving the lowest long-run average cost) for production to be concentrated in a single firm. This market situation gives the largest supplier in an industry, often the first supplier in a market, an overwhelming cost advantage over other actual and potential competitors, so a natural monopoly situation generally leads to an actual monopoly. This tends to be the case in industries where capital costs predominate, creating economies of scale that are large in relation to the size of the market, and hence creating high barriers to entry; examples include public utilities such as water services and electricity. The object of price regulation is to achieve the right mix of price, output, and profits from a natural monopoly: VERY VERY HIGH Fixed Costs. The more people you serve the lower your avg. costs are. (could have very low avg. costs) o Marginal cost for adding +1 person is so minimal.

Economies of Scale: are the cost advantages that enterprises obtain due to size, throughput, or scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output. Often operational efficiency is also greater with increasing scale, leading to lower variable cost as well. The simple meaning of economies of scale is doing things more efficiently with increasing size or speed of operation. Economies of scale often originate with fixed capital, which is lowered per unit of production as design capacity increases. In wholesale and retail distribution, increasing the speed of operations, such as order fulfillment, lowers the cost of both fixed and working capital. Very high fixed cost Low marginal costs leading to possible low avg. costs. (the more people you serve, the lower your costs are) When you have Economy of Scale, Natural monopolies makes sense.

Network Economies: is the emerging economic order within the information society. The name stems from a key attribute - products and services are created and value is added through social networks operating on large or global scales. This is in sharp contrast to industrialera economies, in which ownership of physical or intellectual property stems from its development by a single enterprise. Bundled services.

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Sometimes it makes sense: o One service, Related to Vertical integration: o Same person who produces, transports, sales, are utility, sales to customers.

When Economy of Scale and Network Monopoly work together Natural Monopolies makes sense because average costs and marginal costs go down (cheaper to add one more person and serve that one more person). Who are good candidates for regulation as good public utility? o (big barriers of entry) People who have high investments but want to get in for the potential of long term low avg. and marginal costs. o People who have economies of scale and network economies. Fix Coststhey come no matter what. Variable costscosts that are dependent on another factor, will vary according to situations.

Cost of Service Ratemaking: R=O + B(r) [R is revenue requirement, O is operating expenses (variable costs), B is rate base (fixed costs), and r is the rate of return
Object of regulating the natural monopolies is trying to simulate what a market would do if a market existed. (we want to make it look like as it would if it had competition. Most common way to do it is through Cost of Service Ratemaking. The money that you get if you are running a utility is equal to the stuff you already spent your money on, all your operating costs, and the stuff you spent your money on you multiply by a rate of return. You want R to equal an amount of money that is high enough that you will want to keep on doing business, people wan t to keep investing in your business, and lenders want to keep lending you money. o BUT not so high that if they could run away, your customers would. o WHEN A MARKET WORKS PERFECTLY IT WOULD WORK LIKE THIS. So this is the scenario we would want when we are setting rates. One of the ways you control this is you amortize your costs over a long period of time so that your rates (B) is not insane. You dont want this B to be huge because we do not want customers to run away. Production capacityat what point do you have another monopoly? o That marginal cost is pretty low and your avg. cost is really low. o When you get closer and closer to your maximum production capacity your marginal and avg. costs starts to go up again because it is harder and harder for you to produce. o Thats when we need another monopoly to get you back to the low marginal and low avg. costs. Why not a pure public utility? o Why not have the govt build and operates the public utility off of tax revenue? Because towns and municipalities grow and expand and as they grow the govt is now obligated to provide for the additional needs and it puts a strain on the govt. Once you step in as the govt you have to keep stepping in as the govt except now your costs are going to keep shooting up. You would need to have the regulator (of rates) be independent of the regulated (the public utility). Much harder when it is a pure public utility. Profit motives could be a corruptive, BUT it could also attract expertise and efficiency, because it encourages performance. The better you perform the more they get paid. Encourages increase performance with private public utility.

Approaches to Ratemaking & Criticisms:

Cost of Service Ratemaking Gold platingwe like to exaggerate our costs and exaggerate our rates. To set higher rates sometimes companies will gold plate their costs (make it seem higher) so they can set higher rates, this decreases efficiency. Encourages people to invest but maybe invest too much and makes it inefficient.

Price Caprather than set a specific rate, we could set whatever rate you want as long as it is not above x level. Encourages efficiencyif you get really efficient then you can set rates way above and get all the profits in between.

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Sometimes too much efficiency, could also encourage people to cut corners and cut costs to increase efficiency to get a higher rate of return.

One of the ways we get all the advantages of private entities is the Certificate Convenience and Necessity (monopoly) with a limited timespan. So say you give it to a company for 15 years, and at the end of the 15 years the govt could see if you are that good and if you are not they could kick you out and get someone else in. o This would allow the govt to get market like competition in a monopoly. o The utility who has the job is always wondering who is gunning for my position. o The govt will set the rate according to the best performer in the industry. The govt looks around and says look how good that person is, they must have good rates. Con: might be comparing apples to oranges between the utility companies o The govt could compare you to yourself: compare your best year to your current year. Con: could be apples to oranges again because each year the market changes and the years are different lots of external factors. o The govt could compare you to a model firm: imagine a perfectly functioning company and we will set rate according to that model company (sets good standards for the utility company to look to)

Local vs. State vs. Federal:

Federal Energy Regulatory Commission:
Independent Regulatory Agencyheaded by a commission not just by one person. o 5 person commission. o At least 2 from minority party. Sets the rates for interstate transmission right, wholesale of electricity across state lines, interstate oil and gas transports, pipelines.

State Commissions & Politics

Sometimes just called the State Corporation Commission. Get elected to 6 year terms. Elected Body vs. Appointed body o When elected body decides to raise rates they have to take politics into consideration. If they raise rates they might not be reelected. o Benefit to elected body, you can vote them out. You cannot fire a commissioner of an appointed body unless you have a good reason. o Elected representative may just be good at getting elected not necessarily good at what they are getting elected to do. o Appointees are usually good at what they are getting elected to do thats why they were elected. Have to be approved by senate and is under more scrutiny.

The Ben Avon Doctrine & Confiscatory Ratemaking:

Ben Avon Doctrine:
When courts review agencies, they tend to review them in a strict way when it comes to confiscatory rate making. o When it comes to constitutional issue it reviews it very stringently. o The idea that the court will step in review the case de novo and review it very strictly. Court will give NO DEFERENCE to the agencys finding. Why? Because theyre taking away someones property without just compensation. o Is Ben Avon still good? In the wake of Hope it seems like Ben Avon is no longer good. Larson Ben Avon is dead. Courts will look at it with deference to agency, using Chevron level deference.

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Smyth v. Ames (1898): Constitutional limits of calculating rate base

Confiscatory rate settingwhen you set the rate so low against the company that it is essentially a taking for public use. o The company is essentially losing money because of the rate. o A rate setting agency can still set confiscatory rates. Smith deals with the B in the calculation; in order to avoid confiscatory rate setting you need to set B at the market value. Helps you understand the general idea for confiscatory rate setting. o YOU DO NOT NEED TO SET THE B AT MARKET VALUE. Constitutional limits of calculating rate base.

Bluefield Water Works & Improvement Co. v. Public Service Communication (1923): Confiscatory ratemaking and the rate of return
Talks about r in the calculation. How does the agency calculate your rate of return: o Has to have fair and enlightened judgment with regards to all relevant facts entitled to such rate as will permitted to return a value on the property to which it employs for the convenience of the public equal to that generally being made at the same time and in the same general part of the country on investments and other business undertakings which are attended to or attended by corresponding risks and uncertainties. Confiscatory ratemaking and the rate of return. No constitutional right to profit The return needs to encourage investment; Keep capital available to you, whatever that rate of return is, it needs to be high enough to keep you in business but it does NOT GUARANTEE a profit. No Constitutional protection for making a profit but there is a constitutional protection to not have your stuff taken away for a ridiculously low rate. o What is a ridiculously low rate? For rate base B anything unreasonable, courts are deferential to the agency For r it is Bluefield, enough that you keep credit and capital in the company but not enough that guarantees you a profit. You need to set the r high enough so that lenders will keep lending you money, investors keep investing.

FPC v. Hope Natural Gas (1944): is this the end of the Ben Avon Doctrine?
Is this the end of the Ben Avon Doctrine? Has two ideas: o Courts were heavily deferential to Hope when rate was set. o What we want is fairness, so as long as the end result is fair, how we get there doesnt matter. They just look to whether or not the rate is fair. As long as they are doing that, it does not matter how they got to that rate. o EXPRESSLY OVERRULED SMITHwe dont care how you value the rate base agency as long as the end result is a rate good enough to keep the company in business. Smith said the way to calculate rate base it has to be the fair market value. Hope says no. they can calculate it however much they want to, as long as the end rate is enough. Reasonable as long as meets Bluefield test. o NEVER EXPRESSLY OVERRULED BEN AVON!!!

Jersey Central Power & Light Co. v. FERC (D.C.Cir.1987): What must be included in rate base?
Took out a loan, wants to know if that loan is part of the rate base. o If you keep the 4 billion dollar loan on the books over 15 years but not in the rate base Your shareholders are footing the bill; theyre still paying the interest on this loan. Your consumers get 15 years of it being amortize. o State agency left the loan out because it is not used and useful. Bork says that it should be kept in the rate base. Says it was arbitrary and capricious for the agency to not put in the 4 billion dollar loan without considering that the company is losing money because of it. Says there are so many exceptions to the used and useful doctrine that it is practically useless.

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Exceptions: (1) If it is being built it is in your rate base; (2) If it is not use or useful but might otherwise serve the public interest then thats okay. Bork remands it back for arbitrary and capricious that the agency does not take into consideration that by not having the loans in the rate base it makes the company loses money and is unfair. Bork thinks that whether or not you are making money is the END question, which determines whether something is fair. o Just says the arbitrary and capricious just because the agency did not consider the fact that company is losing money. Mikvas dissent: Hope says we are deferential now. If that is what the agency says that is how it is, that is how it is. Also says that Bork is now looking into the process of rate base, and Hope says it doesnt matter how you get to the end result of the rate base of whether it is fair. Mikva says making money is something you consider in the profit, NOT the end result. o Is fair meaning that as long as you make money. o You do not have a constitutional right to make profit o There is a constitutional right to a rate that is not confiscatory. What the agency is saying is you are a terrible company that is losing money for your investors, you took out a 4 billion dollars and now you want use to help you make money? o Process does not matter, the ends matter.

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CONCESSION CONTRACTS & PSAs:

CONCESSION CONTRACTS & PSAs:

Concession Contract:
Concession Contract
The state grants a monopoly via contract with a company. In the case of a public service concession, a private company enters into an agreement with the government to have the exclusive right to operate, maintain and carry out investment in a public utility (such as a water privatization) for a given number of years. o You are in a partnership with the govt and have an ownership interest in the natural resources being produced. o Usually happens in countries that cannot guarantee a return as well as like Brazil, where involvement in production is much riskier. Distribution: Operates as a monopoly, also acts as a natural monopoly for generation and distribution of energy as well. (Usually done in a competitive bidding process).

Exploration and Production

The granting of the monopoly by the state for production within a geographic region. o Ex. State you corporation are the only corporation that can produce and explore in this region. State enjoys the royalties Company gets the oil o The state would rather have someone else come in and explore and produce the oil and gas because it requires a huge upfront cost and is very risky to failure. Huge potential to fail and HUGE potential to hit riches. o The concession contract is to balance the risk with the windfall; attract the company so they are not bearing too much risk and make sure that the company doesnt get too much windfall and abscond with the nations oil reserve. o Royalties are about 7-10%. o Usually has a minimum exploration requirement to make sure there is a return on the investment. o Concession Kx are MINORITY APPROACH Most countries go with Production Sharing Agreements.

Distribution
Operates as a monopoly, also acts as a natural monopoly for generation and distribution of energy as well. (usually done in a competitive bidding process).

Advantages & Disadvantages

Pros: o Cons: o o

Easier to inspect than PSA, as it is easier to divide the profit between the host country and the international oil company than it is to calculate the profit and cost oil. Not favorable that the international oil companies have complete control over the extracted petroleum. Govt wants more control and a greater cut of the profit.

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Production Sharing Agreements:

Production Sharing Agreements: An agreement between the parties to a well and a host country regarding the percentage of production each party will receive after the participating parties have recovered a specified amount of costs and expenses. It is particularly common in the Middle East and Asia. Although earlier schemes could be termed a PSA, the PSA became popular after the introduction in Indonesia in 1960. A PSC/PSA is either negotiated between a multinational and the host country, or by bidding. The host country remains the owner of the resource. o You are a contractor being paid to develop natural resources owned by the govt. They do a lot of the opposite things of Concession Contract. The company does not own any of the oil it drills AND bears most of the costs (so they bear most/all of the risk) o What is happening is the country is just hiring another company to drill and pump. Lots more sovereignty and control retained by the state and a lot more risk by the country. o Represents about 80% of countries use Production Sharing Agreements. Advantages & Disadvantages as compared to concessions: PSAs are self-contained, which means they possess an autonomy and completeness so that an external regulatory organ is not necessary. Better for counties that are more at risk for political instability. o Probably not as advantageous in more politically stable nations. Pros for govt: o Increase the government take of the profit and maintain the attractiveness of investing in exploration and production, o Permits the host country to invest in the exploration and production phase and establish additional presence of the host country through a new public agent, o Permit governmental control of the phase of production and the destination of the petroleum, o Maintain the possibility of participation. Cons: o Hard to inspect and control the govt because it is hard, in general, to compute cost oil and profit oil. Thus, making it hard to calculate the profit and how this is divided between the different parts.

International Investment Law & Nationalization:

Spectrum:
Pure Private Ownership Concessions (BOT, BDO) granting of monopoly by the govt. o Build Operate Transfera bunch of companies bid for the contract They build and operate the company until they have received enough money to pay them back for building and operating it, and make a bit of money. Then they sell it back to the state for profit. o Build Design Operatethe concessionaire maintains control but only for a certain period. PSAsProduction Sharing Agreements PPPsPublic-Private Partnerships similar to a concession Kx, you have a private company that enters into partnership with a govt and co-ownership of the industry is shared between the private company and the govt.

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Corporatized Public Companies exact same thing as Pure Public owned but have the same obligations as a private company (for efficiency purposes). (owned and operated by the govt but functions like a private corporation) o Annual reports o Independent entity that sets rates for them. Pure Public Ownership the public owns everything.

Transparency & Corruption:

Drafting the Concession Contract:
Tips for drafting by Larson: o Large enoughthe area has to be large enough to attract good management. Big enough to achieve economy of scale. Length/Duration: o Long enough to get management commitment. To get continuity to get it to be managed in a consistent manner. o But short enough to get the benefit of retenderingif it is too long then everyone working in the company now wont be working when it is over so they wont care about winning the bid again; you have to keep them afraid enough of losing the contract that the contract still short (about 15-20 years). o Regular review period needs to be put into the contract. Clear Objective/Information Sharing (good for constructing contracting) o Everyone needs to know what the goals are, who is going to be served? What the rate is going to be? o Vague contracts does no one any good. o Information sharingis good for any concession contract even for production. The state needs to know whats going on with their land and the company needs to know what the state knows. Consensus on Revenue/Forecasts: o Disputes over forecastsget an independent consultant that operates/builds model that predicts revenue. o If it is one side or the other that controls the building the model then you get a lot of whining later on. o Your job in constructing the Kx is to have them never go to court, keep them friends for a long time. Consumer Consultation: o The people who will be using needs to be involved before the Kx is finalized. o The more you get consumers invested in the system and have feedback the less you will get in them fighting back in the rate setting procedures. Competitive Bidding: o Cronyism and Corruption is hugewhere the state just hands it over to someone they know is terrible for the concession Kx. Independent environmental entity regulator: o The same agency setting rate or company that is running through the concession Kx cannot be the same people that regulate the environmental controls. o The company might put making profit over conserving the environment. Cant be the same damn people that run and profit. Best if third party. Direct Tariffs: o Sometimes the govt will set a high rate so that they can take some of that extra money to subsidize schools or the military, but that is bad for the company because it makes it seem like the management isnt integrated. Consumers do not want high rates and it not correspond with the amount of electricity they are using. o Should do this with direct tariffs and taxes instead of adding it into the rate with the concession Kx. Transparency: o Let everyone know what youre doing. o Do not negotiate behind closed doors makes for more headaches than you are solving.

Typical part of Concession contract is the govt telling the company you will make a lot of profit so we need you to invest a bit back to the communitythats why they tax the profit!!

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TRANSMISSION:
TRANSMISSION:

Distributed Generation:
Distributed Generation:
Distributed energy refers to a variety of small, modular power-generating technologies that can be combined with load management and energy storage systems to improve the quality and/or reliability of the electricity supply. They are "distributed" because they are placed at or near the point of energy consumption, unlike traditional "centralized" systems, where electricity is generated at a remotely located, large-scale power plant and then transmitted down power lines to the consumer. o Consumers in some regions are facing periodic rolling blackouts, and businesses throughout the country are not getting the reliable, high-quality power they need. There are two problems at the root of the current power crunch. First, there is insufficient generating capacity to meet peak electricity demand in some parts of the country, such as California. Second, the existing power transmission and distribution grid is aging and cannot carry all of the electricity needed by consumers. o But high-voltage transmission lines are costly to build and replace. And the permitting and construction of large, central power plants is also very expensive and can take years to implement. Distributed energy resources, or DER. DER means using smaller power generators, energy storage devices, and energy efficiency measures throughout the electricity distribution grid to improve its reliability. Installing DER at or near the point of energy use reduces the demand on central power plants and can avoid the need to upgrade transmission and distribution lines to handle additional power requirements. ... Distributed generation is highly flexible -- small, modular generators can be added in increments as the demand for power grows. And, as they typically rely on natural gas or renewable resources instead of coal, distributed generators can also be quieter and less polluting than large power plants, making them suitable for on-site installation. o Most distributed power generators including fuel cells and micro turbines run on natural gas, the cleanest fossilfuel technology. In areas where natural gas is available through pipelines, gas-fueled generators can produce electricity whenever it is needed. o Distributed energy technologies are playing an increasingly important role in the nation's energy portfolio. They can be used to meet baseload power, peaking power, backup power, remote power, power quality, as well as cooling and heating needs. o Distributed energy also has the potential to mitigate congestion in transmission lines, reduce the impact of electricity price fluctuations, strengthen energy security, and provide greater stability to the electricity grid. o Distributed power generators are small compared with typical central-station power plants and provide unique benefits that are not available from centralized electricity generation. Many of these benefits stem from the fact that the generating units are inherently modular, which makes distributed power highly flexible. It can provide power where it is needed, when it is needed. And because they typically rely on natural gas or renewable resources, the generators can be quieter and less polluting than large power plants, which make them suitable for on-site installation in some locations. o Grid-connected distributed energy resources also support and strengthen the central-station model of electricity generation, transmission, and distribution. While the central generating plant continues to provide most of the power to the grid, the distributed resources can be used to meet the peak demands of local distribution feeder lines or major customers. Computerized control systemsusing phone lines or wireless technologiesmake it possible to operate the distributed generators as dispatchable resources, generating electricity as needed. In addition, emerging smart grid technologies are making it easier for utilities to operate distributed generators as dispatchable resources.

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Policies & Obstacles for Deployment

Transmission Line Siting:

Transmission & Renewable Energy
You can only lay transmission in rural areas or low income areas. Remember complaints of high income individuals.

Piedmont Environmental Council v. FERC (4th Cir. 2009): FERCs role in interstate line sitting
FERC determines its a national interest through notice. FERC must make rates reasonable, just, and non-discriminatory. FERC can regulate interstate line setting when there is national interest, interstate interests involved, and when state authority lacks authority or have authority but withheld authority for a year. Withholding approval definition o Denying a permit counts as withholding. Takeaway o FERC can jump in when there is national interest, interstate interests involved, and when state authority lacks authority or have authority but withheld authority for a year. o Withhold=sitting around for a year, not denying. o A lot of discussion about NEPA

Transmission Cost Allocation:

Illinois Commerce Commission v. FERC (7th Cir.2009): FERC rates and Regional Transmission Organizations
National Transmission Organization are conglomerates of utilities. FERC tends to be deferential to their price setting. Can disapprove if unjust, unreasonable, or discriminatory.

Smart Grids:
Smart Grids generally refers to a class of technology people are using to bring utility electricity delivery systems into the 21st century, using computer-based remote control and automation. These systems are made possible by two-way communication technology and computer processing that has been used for decades in other industries. They are beginning to be used on electricity networks, from the power plants and wind farms all the way to the consumers of electricity in homes and businesses. They offer many benefits to utilities and consumers -- mostly seen in big improvements in energy efficiency on the electricity grid and in the energy users homes and offices. o For a century, utility companies have had to send workers out to gather much of the data needed to provide electricity. The workers read meters, look for broken equipment and measure voltage, for example. Most of the devices utilities use to deliver electricity have yet to be automated and computerized. Now, many options and products are being made available to the electricity industry to modernize it. As demand for energy skyrocketed and will continue, there has been a chronic underinvestment in getting energy where it needs to go through transmission and distribution, further limiting grid efficiency and reliability. While hundreds of thousands of high-voltage transmission lines course throughout the United States, only 668 additional miles of interstate transmission have been built since 2000. o The grid is struggling to keep up. Smart Meters & Advance metering infrastructurean approach to integrating consumers based upon the development of open standards. It provides consumers with the ability to use electricity more efficiently and provides utilities with the ability to detect problems on their systems and operate them more efficiently. o AMI enables consumer-friendly efficiency concepts like prices to devices to work Assuming that energy is priced on what it costs in near real time: Price signals are relayed to smart home controllers or end-consumer devices like thermostats, washer/dryers and refrigeratorsthe homes major energy-users.

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Dealing with Peak energy: o While supply and demand is a bedrock concept in virtually all other industries, it is one with which the current grid struggles mightily because, as noted, electricity must be consumed the moment it is generated. o Without being able to ascertain demand precisely, at a given time, having the right supply available to deal with every contingency is problematic at best. This is particularly true during episodes of peak demand, those times of greatest need for electricity during a particular period. o Example: Imagine that it is a blisteringly hot summer afternoon. With countless commercial and residential air conditioners cycling up to maximum, demand for electricity is being driven substantially higher, to its peak. Without a greater ability to anticipate, without knowing precisely when demand will peak or how high it will go, grid operators and utilities must bring generation assets called peaker plants online to ensure reliability and meet peak demand. Sometimes older and always difficult to site, peakers are expensive to operate requiring fuel brought on the more volatile spot market. But old or not, additional peakers generate additional greenhouse gases, degrading the regions air quality. Compounding the inefficiency of this scenario is the fact that peaker plants are generation assets that typically sit idle for most of the year without generating revenue but must be paid for nevertheless. o In making real-time grid response a reality, a smarter grid makes it possible to reduce the high cost of meeting peak demand. It gives grid operators far greater visibility into the system at a finer granularity. Enabling them to control loads in a way that minimizes the need for traditional peak capacity. In addition to driving down costs, it may even eliminate the need to use existing peaker plants or build new onesto save everyone money and give our planet a breather. Smart Grid & Smart Meters: o Not the same thing o Metering is just one of the hundreds of possible applications that constitute the smart grid.

The devices, in turn, process the information based on consumers learned wishes and power accordingly. The house or office responds to the occupants rather than vice versa.

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LETS SAY YOU WANT TO:

LETS SAY YOU WANT TO:

Start a Hydraulic Fracturing Operation:

What are your liability concerns? Groundwater contaminationbecause it is a hydraulic fracturing operation the people around you and the govt will probably attribute any and all groundwater contamination within a specific range of the fracking operation to the well operator. o Must be done in accordance with the Clean Water Act. Section 301(a) of the CWA prohibits the discharge of any pollutant into navigable watesr Could obtain a permit under the National Pollutant Discharge Elimination System (NPDES) as authorized under Section 402 of the CWA. The permit allows for discharges to navigable waters that would otherwise be prohibited by Section 301(a) of the CWA. OR transfer the wastewater to publicly owned treatment works (POTW) that discharge to navigable waters. Reclamation effortsremediation of contaminated areas, replacement of water supply if needed, putting the land back to as close to where it was as possible before they got there. o Or while drilling keep and preserve as much as possible of the land. Because it is water intensive a lot of times it will allocate too much of the ground water and dry up the lands around them. o Have to pay for water rights.

Build & Operate a Hydroelectric Plant:

What permits do you need? FERC need approval and a permit from FERC. o They regulate both the construction and operational phase of a project. o Pre-constructionFERC must review and approve of the designs, plans, and specifications. o During constructionFERC will frequently inspect a project, and once it is done FERC will continue to inspect the dam. US Army Corps of Engineersyou need regulatory permit from them for development on US waters, including wetlands. o Runs some of the biggest dams in the US. o Any activity that fills in a river needs a permit from US Army Corp of engineers o Dredge and fill permits Works closely with the Fish and Wildlife services to make sure that dredge and fill operations meet Section 404 of the CWA. General permit Includes minor road activities, utility line backfill, bedding are also there. Tennessee Valley Authority (TVA)if you are building a dam in TV region you need to get a construction permit from TVA as well, because they manage the river systems there. 42

What Agencies will you have to deal with? FERCevery major action goes through FERC. US Army Corp of Engineersyou need them if you are operating on the river. TVAsort of like drug dealers, if you want to sell on their turf you has to pay the piper. Fish and Wildlife and National Marine Fisheries Serviceto an extent you have to deal with them to make sure shits not dying all over the place. o Evaluate impacts on fish and wildlife of all new Federal projects and federally permitted projects, including projects subject to the requirements of Section 404. EPAbecause they help develop and interpret policy, offers guidance and environmental criteria. o Determines scope of geographic jurisdiction and applicability exemptions. o Approves and oversees state and tribal assumption; o Has authority to prohibit, deny, or restrict the use of areas as disposal site. o Enforcer for Section 404 of CWA.

Generate and Distribute electricity with a hybrid natural gas/wind farm:

What if you want to operate on federal land? You would need to get a permit from FERC probably one from EPA. You would need to get permission from Bureau of Land Management (BLM). Refer to Public lands. What are your concerns? Although both are relatively clean energy (wind being cleaner) o They are huge, and clunky. o You would need giant factors to build either or both of these to generate electric. This ruins the naturalness of federal lands like wilderness, or marsh, or forest. Its ugly. Windmills will kill migratory birds o Are loud as fuckdisturb the tranquility and ecosystem of the shit that lives there. What are the obstacles? Hippies. Like buttloads of them. o Tree hugging environmental hippies.

Drill for Offshore Oil:

On what grounds will opponents challenge your project? A steady stream of pollution from offshore rigs causes a wide range of health and reproductive problems for fish and other marine life. Offshore drilling exposes wildlife to the threat of oil spills that would devastate their populations Offshore drilling activities destroy kelp beds, reefs and coastal wetlands. Offshore drilling in sensitive areas would increase domestic oil production by 3 percent by 2030 compared to a reference case, according to the Energy Information Administration. But because oil 43

prices are determined on the international marketany impact on average wellhead prices is expected to be insignificant. Production would be expensive, would not start for a long time, and would have no short-term effect on oil prices. o The average oil field size in the OCS is smaller than the average in the Gulf of Mexico, which is already being developed. As a result, much of the oil in the OCS would be expensive to extract, and is only becoming attractive now as a result of high oil prices. o According the Energy Information Administration, it would take at least five years for oil production to begin. EIA predicted that there would be no significant effect on oil production or price until nearly 20 years after leasing begins. High fuel prices o Opening up our offshore oil fields would reduce the price of gasoline at the pump. Gas prices are continuing to climb and with countries like China and India becoming more industrialized, world demand for oil will increase as will gas prices. Though extracting our oil offshore will not greatly reduce energy prices or cut our dependency on foreign oil, it will smooth out the spikes in future energy prices. Oil Companies already have oil leases o The worlds oil companies hold as many as 5,500 oil leases that are not being used. The Department of the Interior estimates that 68 billion barrels of oil are accessible in areas already open to offshore drilling in the Gulf of Mexico and Alaska. Oil Spills o Drilling off the U.S. coast is dangerous due to unstable weather conditions and other natural disasters. Offshore facilities and the transport of crude oil from them pose an environmental risk during normal operations. More than 7 million gallons of oil spilled during Hurricane Katrina. Seven of the 13 most recent oil spills were hurricane related. Invest in renewable o Opening up offshore areas for oil and gas exploration diverts the United States from aggressively developing alternative energy sources that would improve the economy, create jobs, and the protect environment. Developing alternative energy sources is critical for the U.S. economy. Some say that offshore oil production will help keep the economy afloat until it can transition away from fossil fuels and toward renewable resources. But others argue that keeping the emphasis on traditional fuel sources and opening up new offshore oil reserves pulls the focus away from developing renewable energy.

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