Currents - Energy Industry Insights, V 8, Issue 11, November 2024

Hikmat Al-Chami, Stephanie Eaton, James Elliott, Carrie Grundmann, Matthew Heiskell, William Herlihy, Brienne Marco, Nicholas Muto, Barry Naum, Joseph Unger, James Walls, Derrick Price Williamson, David Yaussy
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Volume 8, Issue 11

● Welcome

Welcome to our 11th Issue of Currents 2024, our energy e-newsletter. This will be our last issue of 2024, and we want to sincerely thank you for reading Currents for the past eight years. Our goal is to relay top trending news stories, but to also explain WHY we think they are important. We hope we have achieved that goal.

Again, thank you for reading and we wish you joyous holidays and a prosperous 2025!

Energy Policy Uncertainty in Post-Election America

By Barry A. Naum

"Elections have consequences." Though this phrase is perhaps a bit tired, it also is certainly true to some degree, as each new administration ushers in policies that may either advance or reverse the initiatives of the predecessor, particularly if the new President is from the opposition party. Such is the case with the election again of Donald Trump as the 47th President, and the prospects of the next four years in comparison with the immediately preceding administration are paramount on everyone's radar, no less so in the realm of domestic energy policy. But rather than speaking in terms of "consequences," perhaps the best approach is to examine the potential impacts that the nation's election decision poses, as those impacts may be both positive or negative, depending on the point of view. While those impacts are likely to be far-reaching, this article highlights just a handful of predominant energy technology sectors, including nuclear, solar, electric vehicles (EVs), offshore wind, and battery storage.

Click here to read the entire article.

 

First Impression in West Virginia

“In a case of First Impression in West Virginia, the state’s Intermediate Court of Appeals Rules that NPRIs are real property, not personal property, and they are subject to West Virginia’s Delinquent Real Property Delinquent Tax Sale Program.”

As the name suggests, an oil and gas non-participating royalty interest or “NPRI” is a royalty interest. An NPRI holder has no right to discover or produce the oil and gas; he has no right to lease or sell the oil and gas; he has no right to receive bonuses or delay rentals on the oil and gas; and he is not chargeable with any of the costs of discovery or production of the oil and gas. See Davis v. Hardman, 148 W. Va. 82, 90, 133 S.E.2d 77, 81–82 (1963), citing Munger v. Pittman, 235 Miss. 85, 86-87, 108 So.2d 565, 566 (1959). Those rights and obligations are reserved for the owners of the oil and gas in place. Id.

West Virginia’s highest court has not yet ruled on whether NPRIs are, for ad valorem tax purposes, real or personal property. It appears that the issue will soon be teed up for the West Virginia Supreme Court of Appeals.

In an October 8, 2024 opinion, the Intermediate Court of Appeals of West Virginia (the ICA) held that, for ad valorem tax purposes, NPRIs should be classified as real property because they represent a presently vested right in minerals in place, rather than a future interest dependent on production. The ICA explained that while oil and gas royalties derived from production are personal property, unaccrued NPRIs are interests in mineral in place and are therefore real property. By classifying NPRIs as real property that vest immediately upon grant or reservation, the court reasoned that they comply with the Rule Against Perpetuities. The ruling makes NPRIs subject to West Virginia’s delinquent ad valorem real property tax sales program.

The October 8 ICA opinion is expected to be appealed to the West Virginia Supreme Court of Appeals. For more information on this important case, please contact us. --- James A. Walls, William M. Herlihy, Matthew P. Heiskell

 

Appalachian Power Announces Plan for Small Modular Reactor in Campbell County

"The power company said the project could take more than a decade. Appalachian Power plans to file an application with the Virginia State Corporation Commission in Spring of 2025."

Why this is important: The article summarizes the announcement by AEP that its subsidiary, Appalachian Power Company (APCo), intends to build a small modular nuclear reactor (SMR) in Virginia to provide electric power supply to its customers. The article emphasizes the novelty of this new, more nimble nuclear power technology. APCo, which actually provides power to customers in both Virginia and West Virginia, indicates that although this could increase costs to its customers, it is seeking a federal grant “that would take some of the pressure off of customers.” It would appear that APCo is pursuing this project in part to comply with Virginia’s “Clean Economy Act” (VCEA) and mandate to reduce carbon emissions. This is important because APCo, in advancing this project, will likely seek cost recovery for it from its customers in both Virginia and West Virginia, and ratepayers in West Virginia have already borne nearly 50 percent rate increases from APCo in the last five years and are also faced with a recently filed one-quarter billion dollar base rate case increase. --- Derrick Price Williamson

 

Biden Administration Launches Historic Methane Fee for Oil, Gas Drillers and A Methane Pollution Fee on Oil and Gas Faces a Cloudy Future Under Trump

“It follows through on a directive from Congress included in the 2022 climate law, which is expected to be finalized by early next year after publication in the Federal Register."

“The agency estimates the new fees will reduce methane emissions by 1.2 million metric tons through 2035 – ‘the equivalent of taking nearly 8 million gas-powered cars off the road for a year.’"

Why this is important: The Biden administration followed through on part of the directive from the Inflation Reduction Act. Sources that demonstrate compliance with certain other regulations are intended to be exempt from the methane tax (call it what it is). The problem is the tax is due in 2025 yet certain regulations that provide the exemption have yet to be promulgated. Many existing sources may not even be aware they are subject to the tax and to the extent they are, they have no ability at this time to utilize the exemption.

In addition, the “Methane Pollution Fee” or “Waste Emission Charge” was published in the Federal Register this week. These regulations are subject to the Congressional Review Act, and with the GOP controlling Congress and the White House, these regulations are likely to be high on the list for repeal by President-Elect Trump. --- James D. Elliott

 

With the Chevron Doctrine Overturned, the New ‘Judicial Veto’ of Regulations Will be Detrimental to Science and Business

“Litigation over regulations will become chaotic, and because uncertainty is anathema to investment in innovation, it will become harder for entrepreneurs and start-ups to disrupt markets.”

Why this is important: The article discusses the recent overturning of the Chevron Doctrine by the U.S. Supreme Court, which had allowed federal agencies to interpret ambiguous laws for almost 40 years. According to the article, with this new shift to judicial oversight by a "judicial veto," regulatory uncertainty may empower courts to challenge long-standing agency decisions. According to the article, this could stifle innovation, delay regulatory processes, and encourage forum shopping for plaintiffs searching for judges sympathetic to their cause. The author believes this new approach risks creating fragmented, inconsistent rules and longer timelines for regulatory clarity, potentially harming sectors reliant on clear regulations. The upshot is the judicial veto could stimulate investment in some industries, particularly those that benefit from reduced regulation. The promise of fewer regulations may be mired in a fractured, unpredictable, and prolonged regulatory landscape. --- Schenley N. Kent

 

U.S. Sets Targets to Triple Nuclear Energy Capacity by 2050

“The U.S. Department of Energy estimates we’ll need an additional 200 gigawatts (GW) of new nuclear capacity to keep pace with future power demands and reach net-zero emissions by 2050.”

Why this is important: The United States government's actions have shown that they are committed to nuclear energy now and in the future. The passing of both the Bipartisan Infrastructure Law and Inflation Reduction Act and the Advance Act helped streamline regulatory processes for the domestic nuclear sector. The investments the Acts provide as well as the tax incentives have revived the nuclear energy industry. Before the Acts, nuclear energy plants were bottoming out and some were on the verge of closing. These plants are now exploring operational extensions, retired reactors are progressing toward restarting, and new reactors are steadily approaching deployment.

Nuclear energy is the largest source of clean energy in the country, and in order to achieve net-zero emissions by 2050, the Department of Energy estimates we'll need an additional 200 gigawatts of new nuclear capacity. At the United Nations' climate summit, the U.S. set new deployments targets and identified actions the government can take to achieve the end goals when it comes to nuclear energy.

With this shift in policy, the current infrastructure in place will have to be expanded and new infrastructure will have to be built. Many of the original sites were built with expansion in mind, which would make it easy for expansion construction. Another way to increase capacity is to leverage existing infrastructure at coal plants. Areas around coal plants can accommodate smaller modular reactors which cost less upfront capital investment to build. This would give those companies who operate coal plants an opportunity to benefit from the nuclear energy resurgence and make sure no community is left behind on our country's way to achieve net-zero admissions. The increase in capacity, expansion plans, and restarting reactors will also increase employment opportunities for many Americans. --- Nicholas A. Muto

 

Japan's Nuclear Watchdog Disqualifies a Reactor for the First Time Since Fukushima Disaster

“The decision is a setback for Japan as it seeks to accelerate reactor restarts to maximize nuclear power.”

Why this is important: Japan's Nuclear Regulation Authority's (NRA) historic decision to disqualify the Tsuruga No. 2 reactor marks the first rejection under post-Fukushima safety standards, signaling a stringent approach to nuclear safety that could impact Japan's ambitious nuclear energy revival plans. This development comes at a crucial time as the country seeks to balance its carbon neutrality goals with nuclear safety concerns, particularly following the recent January 2024 Noto Peninsula earthquake.

The decision follows an eight-year safety review process in which the NRA accused Tsuruga No. 2 operators of complicating with the use of data coverups and operator mistakes. The NRA's ruling centers on the potential presence of active fault lines beneath the reactor, with Chairman Shinsuke Yamanaka emphasizing the "strict examination" process. This rejection carries significant implications for Japan's nuclear energy strategy after Japan’s government in 2022 adopted a plan to accelerate reactor restarts to achieve carbon neutrality by 2050. Currently, of more than 50 commercial reactors, 27 have applied for restarts with 17 receiving approval under post-Fukushima standards. While Japan Atomic Power calls the decision "extremely regrettable," the government maintains its commitment to nuclear energy expansion, though Chief Cabinet Secretary Yoshimasa Hayashi reaffirms that safety remains the prerequisite for operation. --- Hikmat N. Al-Chami

 

Big Offshore Wind Project Proposed for New York as Other Sites are Evaluated in 3 States

“A large offshore wind farm is being proposed in the waters off New York as federal agencies are pressing ahead with reviews of seven other ocean sites.”

Why this is important: Wind energy is one of the renewable resources needed for the United States to significantly reduce greenhouse gas emissions and meet federal and state carbon reduction standards. Renewable energy sources are also vital for certain regulated utilities to meet state-mandated carbon emission reduction levels (e.g. VA and NC), as well as for various commercial and industrial companies to meet clean energy goals. However, as we previously reported in Currents (Volume 8, Issue 10, 2024), offshore wind construction has faced significant headwinds in this country for logistical, financial, and legal reasons. As a result, the United States lags far behind Europe in terms of offshore wind energy generation, as Europe has 35 Gigawatts (GW) of offshore wind capacity installed to meet climate and energy targets (with 1 GW equal to 1,000 MW).

Currently, there are three operational utility-scale offshore wind farms in the United States with a combined total wind power capacity of 174 Megawatts (MW): (1) Block Island Wind, a 30 MW capacity wind facility that has served Rhode Island since 2016; (2) Coastal Virginia Offshore Wind Pilot Project, a 12 MW solar facility that has served Virginia since 2020; and (3) South Fork, a 132 MW facility serving New York since 2024. However, as this article notes, there is progress being made in the United States as other offshore wind projects are being proposed and sites are being evaluated for potential wind farms, indicating that support for offshore wind perseveres. Three separate offshore wind projects are advancing toward construction:

  1. New York – in October 2023, Community Offshore Wind proposed a large wind farm 64 miles off the coast of New York and 37 miles off the coast of New Jersey that could generate 2.8 GW of electricity with an undisclosed number of wind turbines.
  2. New Jersey – in July 2024, Community Offshore Wind proposed a wind farm off the coast of Long Beach Island.
  3. Maryland – the Maryland Offshore Wind Project plans 114 turbines, 4 offshore substation platforms and up to 4 offshore export cable corridors 11.5 miles off the coast of Maryland.

Environmental studies on these proposed projects have been completed. The United States Bureau of Ocean Energy Management (BOEM) conducts environmental reviews related to potential impacts on marine wildlife, water quality, and air quality. On October 22, 2024, BOEM released its review of six New York and New Jersey offshore wind sites, finding that while many impacts would be temporary, development of offshore wind farms may still result in “unavoidable adverse impacts.” The following day, the National Oceanic and Atmospheric Administration (NOAA) concluded that a 32-acre facility in the Staten Island area of New York City for the assembly of the offshore turbines is likely to adversely affect, but not likely to jeopardize certain marine life in the area. NOAA also reported that it did not expect the proposed offshore wind site in Maryland to kill or seriously injure any marine mammals.

Some preliminary project approvals have been granted. The first two phases of the Maryland project have preliminary approval from the state of Maryland. The United States Environmental Protection Agency (EPA) granted the New Jersey project a permit under the Clean Air Act (CAA).

However, litigation related to these projects is in full swing. A grassroots non-profit organization has appealed the New Jersey project’s CAA permit. Thirteen cases are pending in federal courts related to offshore wind projects, particularly on the East Coast. Opponents to the development of offshore wind express concerns over high prices of electricity generated by wind farms, noise pollution, negative impact on wildlife, technology risks, and altered views for coastal residents, businesses and tourists. Proponents of wind farms emphasize the crucial need for this renewable resource to combat greenhouse gas emissions, the impact of which has devastating global effects on humans and wildlife. While litigation has thwarted some offshore wind projects, thus far, the New York, New Jersey, and Maryland projects listed above are moving forward. --- Stephanie U. Eaton

 

Trump Picks GOP Former Congressman Lee Zeldin to Lead the EPA

“One of Zeldin’s first tasks will likely be starting the process to overturn several of the Biden EPA’s biggest rules on climate, including tailpipe regulations for vehicles and rules aimed at slashing pollution from power plants and oil and gas producers.”

Why this is important: Lee Zeldin, former congressman from Long Island and New York gubernatorial candidate, has been nominated to administer the Environmental Protection Agency. He has a clear mandate from his boss, President-Elect Trump, to roll back many of the Biden administration’s regulations and programs. It’s reasonable to expect pullbacks in climate regulations like the Clean Power Plan, tailpipe emissions limitations, and methane regulations. There might even be a reconsideration of the Endangerment Finding, the lynchpin to regulating carbon dioxide and other greenhouse gases as pollutants. Success in pursuing these and many other changes will depend, to some degree, on whether lower-level career staff are cooperative or resist implementing the Trump/Zeldin agenda. --- David L. Yaussy

 

Morrisey Kicks Off Summit with His Energy Agenda

“He may only have over two months left in his final term, but Attorney General Patrick Morrisey assured energy industry leaders that the state will continue to fight federal overreach in 2025 and remove cumbersome regulations.”

Why this is important: The article summarizes Governor-elect Morrisey’s initial overview of his anticipated energy agenda. That includes seizing the opportunity for West Virginia to be the premier energy state in the country and for the Attorney General to be known as “an energy governor.” Key commitments include parsing of legislative rules and agency regulations that undercut West Virginia’s regional and national competitiveness in the energy sector, and proclaiming that West Virginia will not maintain the status quo. This is important because the status quo includes regulated electric rates for West Virginia consumers that have increased by about 50 percent in the last five years and that are in the “middle of the pack” compared to other states nationally. Further, as the article details, the status quo also includes a continuing predominant reliance on coal-fired power generation, and although coal-fired power is needed for the grid, West Virginia needs to advance an “all of the above” power generation resource mix to fulfill its heritage and opportunity as the premier energy state. --- Derrick Price Williamson

 

Work Expected to Begin Next Spring on $300 Million Hydrogen Gas Plant Near Princeton

“Each plant, according to company officials, will employ upwards of 100 to 125 people in addition to the new coal mining jobs that will be needed to supply coal to those facilities.”

Why this is important: Construction is expected to begin next spring on a groundbreaking $300 million hydrogen gas plant planned for Princeton, West Virginia. This project represents a significant shift in clean energy production using traditional coal resources, potentially creating a model for sustainable energy transition in coal-dependent regions. The project could demonstrate how legacy fossil fuel infrastructure and local workforce can be adapted as cleaner energy production rises in demand.

TNT Hydrogen's planned facility, which is set to break ground in spring 2025, aims to utilize locally mined coal to create hydrogen-based gas for clean electricity production. According to Tim Hawks, managing partner of TNT Biofuels of West Virginia, the project will employ 100-125 people directly, with additional jobs created in coal mining to supply the facility. The plant will connect to the 13-state PJM grid, representing a significant investment in regional clean energy infrastructure. Hawks emphasizes that the two-year development process is nearing completion, with financial backing from investors, banks, and equity firms close to being finalized. --- Hikmat N. Al-Chami

 

The Battery Revolution is Finally Here

“The push toward the next generation of batteries has two schools of thought: advance current technology to new heights, or change gears completely into a new type of battery cell.”

Why this is important: The Biden administration wants to force a shift to electric vehicles in a short time frame, roughly a decade. That’s incredibly quick for such a huge societal change, and it is running into significant consumer resistance. Greater adoption of EVs is coming, but it will likely be as a result of EVs becoming superior products that consumers want. This article reports on some of the incremental changes that are being made to lithium ion batteries, and the sea change coming with adoption of solid state batteries, that will make EVs increasingly attractive. It takes time for that evolution to occur. Consider the transition from the first bag phones (1988), flip phones (1996) Blackberry (1999), and iPhone (2007). Improvements (and widespread acceptance) come gradually, as a result of a dynamic economy and competition in the market. --- David L. Yaussy

 

Global Energy Sector Employment Increased by 3.8% in 2023, Outpacing the Wider Economy

“New IEA report finds that sector added 2.5 million jobs worldwide last year, led by clean technology manufacturing, though skills shortages remain a key issue.”

Why this is important: This article explains that employment in the global energy sector grew robustly in 2023, buoyed by a wave of investment in manufacturing clean energy technologies. The World Energy Employment report highlights that the number of energy jobs globally rose by 3.8 percent last year, surpassing 67 million. By comparison, job growth economy-wide was 2.2 percent. According to the article, jobs in the clean energy sector grew by 1.5 million in 2023, representing 10 percent of overall job growth in leading markets; however, global coal employment fell for the third year in a row, declining by around 1 percent, primarily due to continued improvements in upstream productivity. Energy employment is slated to grow by 3 percent in 2024, a slowdown compared with last year due to the impacts of tight labor markets, elevated interest rates, and changes in the expected pipeline of new energy projects. --- Schenley N. Kent

 

Recent West Virginia Supreme Court Decisions Impact Oil and Gas Producers

By James A. Walls, William M. Herlihy and Matthew P. Heiskell

In two monumental November 14, 2024 spilt decisions, the West Virginia Supreme Court gives oil and gas lessees a huge win and makes doing business in West Virginia more expensive for oil and gas producers.

Click here to read the entire article.

 

The Corporate Transparency Act: Deadline Approaching

By Brienne T. Marco

Before we know it, 2024 will be coming to a close. As we approach the end of the year, we want to remind you of an important upcoming deadline under the Corporate Transparency Act. Companies formed before January 1, 2024 must file their initial beneficial owner report no later than December 31, 2024.

Click here to read the entire article.

● EIA Energy Statistics

Here is a round-up of the latest statistics concerning the energy industry

ELECTRICITY

Electric Power Monthly

PETROLEUM

This Week in Petroleum

Weekly Petroleum Status Report

NATURAL GAS

Short-Term Energy Outlook - Natural Gas

Natural Gas Weekly Update

Natural Gas Futures Prices

COAL

Short-Term Energy Outlook - Coal

Coal Markets

Weekly Coal Production

RENEWABLES

Short-Term Energy Outlook

Monthly Biodiesel Production Report

Monthly Densified Biomass Fuel Report

Send Print Report

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

© Spilman Thomas & Battle, PLLC

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