MANAGING LEGAL RISK IN REGULATED PROJECTS · Rick Smead RBN Energy, LLC. Presentation to the....

MANAGING LEGAL RISK IN REGULATED PROJECTS

Rick SmeadRBN Energy, LLC

Presentation to theEnergy Bar Association

Midyear ForumOctober 16, 2017

The US Natural Gas Industry Is Enormous

▪ Over 300,000 Miles of Pipe

▪ Over 200 Companies

▪ Largest gas market in the world

▪ Approximately 75 Bcf/day average

▪ Peak flow of over 100 Bcf/day

▪ Equivalent to 600,000 MW of combined-cycle capacity

Midwest via Ohio (4.8)

Sample Natural Gas Pipeline Projects from Northeast by Corridor (Bcf/Day)

14 Bcf/day Total, plus

8 Bcf/day in Service

4

Overview of Project Formulation

FERC Processing

Including Pre-Filing

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Outline of Panel Discussion▪ Georgia Carter (General Counsel, Millennium Pipeline)

▪ What kind of regulatory risks does one encounter?▪ Rate risk undermining economics of project? (Use of negotiated rates)▪ FERC certificate risk that PA conditions won’t be met?▪ Non-FERC risk from other statutory hurdles, especially at state level?▪ Case in point, the CPV Valley lateral

▪ Bill Wolf (Assistant General Counsel, Kinder Morgan)▪ Recognition and treatment of regulatory risk in contracts for the development of new infrastructure.▪ How do developers evaluate, communicate with counterparties?▪ How can contractual commitments be made on a firm basis, yet also accommodate timing delays and other

development contingencies?▪ General timing issues around project development and associated commercial contracts(e.g., commitments to

filing dates, construction start dates, in-service dates, etc.)

▪ Christopher Cross (Financial Counsel, Latham & Watkins)▪ The developer’s challenge: managing different perspectives on midstream development ▪ How do the different capital provider’s perspective differ?▪ Managing funding risks▪ Perception of risk, banks vs. equity investors, and how well is it understood?

Connecting communities to cleaner energy

Navigating Regulatory and Other Challenges for Natural Gas Pipelines

Risky Business….

Pipelines face an increasingly hostile environment

Natural gas pipeline projects are increasingly complicated Project developers need to be mindful of regulatory and other risks

Coordination needed between legal, commercial, regulatory and project managers Other customers may weigh in on cost allocation; anchor shipper benefits Endless opposition from environmental groups and landowners

Segmentation and cumulative impacts Greenhouse gas analysis Human health impacts Concerns over property values Impacts on endangered species, natural resources Impacts of fracking What constitutes market?

Opposition highly organized and using every available forum Pressure applied at state and local levels, not just FERC

Issuance of Permits Increasingly politicized New York’s rejection of three 401 requests within 18 months

Connecting communities to cleaner energy 2

Impacts to Project Sponsors

Timing is especially difficult to predict Prolonged battles over permits can lead to other issues

Do customers have “outs” after a specific date? If total deal not approved? Costs go up and deal economics can change for project sponsors

Negotiated Rates or Recourse Rates? Incremental Rates vs Recourse Rates? Fuel? Hard Cap on Costs or Cost Sharing? Can the project sponsor abandon the project if economics collapse?

Markets may change Could earlier projects impact demand for services? Pipelines reverse flows (160 FERC ¶ 61,127 (REX reverse flow MFN) Import terminals become export terminals (160 FERC ¶ 61,134 (Cove Point))

Lack of certainty FERC orders being appealed by environmental groups

Sabal Trail: FERC certificates vacated after construction completed Rules still developing around state ability to reject FERC-approved project How will this impact funding for projects going forward?


Millennium’s Valley Lateral Project

The Valley Lateral Project Very Small Project: 7.8-mile lateral in Orange County, New York. Sole gas source for a new combined-cycle power plant Plant fully permitted in NY and under construction New York ISO plans reflect reliance on the plant for future electric reliability.

Unusually low impact on waterbodies and wetlands: Only 12 stream crossings, 9 of which Millennium will bore or drill. Of remaining 3 crossings, 2 streams are intermittent; likely dry during crossing. The final stream (10 feet wide and 3 feet deep)will be crossed via open cut. No permanent wetland loss; temporary impact on 1.5 acres of wetlands.

What could go wrong?


Public Attitudes Towards Natural Gas Have Changed


Valley Lateral Timeline

Nov. 2015: Millennium files certificate application at FERC and requests 401 certification from NYSDEC

Nov. 2016: FERC issues order approving the project, giving Millennium one year to construct.

Millennium Pipeline Co., L.L.C., 157 FERC ¶ 61,096 (2016) NYSDEC refuses to issue water permit; claims CWA deadline is one year from “complete” application and

Millennium application not yet determined to be complete.

Dec. 2016: Millennium sues NYSDEC at the Court of Appeals in the D.C. Circuit under NGA 19 (d)(2) (agency delay)

June, 2017: Millennium files to increase the estimated cost of the project and recalculates recourse rate. In Millennium v. Seggos, No. 16-1415, 2017 WL 2697987 (D.C. Cir. June 23, 2017), the court held that FERC may

issue Millennium a NTP based on evidence that the NYSDEC has waived its ability to issue a WQC. The D.C. Circuit explained, “[T]he delay triggers the [CWA’s] waiver provision, and Millennium then can present

evidence of waiver directly to FERC to obtain the agency’s go-ahead to begin construction.” “So what can Millennium do in the face of the Department’s continued inaction? Millennium can go directly to

FERC and present evidence of the Department’s waiver.”


Valley Lateral Timeline July 2017:

Millennium requests a notice to proceed from FERC NYSDEC opposes request and indicates its intent to act by August 30, 2017

August 2017: NYSDEC holds public comment period and hearing on Valley Lateral water permits; 6000 comments filed,

largely opposing fossil fuel, the power plant and fracking. NYSDEC issues decision letter contingently denying 401 certification on grounds unrelated to water quality;

Concurrently files request to reopen the record at FERC, claiming FERC’s environmental review is flawed.

September 2017 On September 15, FERC issued the Declaratory Order holding that “[NYSDEC], by failing to act within the

one-year timeframe required by the CWA, waived its authority to issue or deny a water quality certification.” FERC held, “the triggering date for waiver under section 401 of the CWA as the date the certifying agency receives a

certification application. “ “If a state agency concludes that a certification application does not meet CWA requirements, it can deny the

application. [NYSDEC] declined to take that step or to otherwise timely act on Millennium’s application. Accordingly, it waived its certification authority.”

October 2017 FERC grants one-year extension of Millennium’s certificate


Challenges to Pipeline Infrastructure Sierra Club: NGOs claimed that FERC as part of NEPA failed to adequately review downstream

environmental impacts of the greenhouse gas (GHG) emissions of the Sabal Trail Pipeline. In a 2-1 decision the court ordered the FERC go back and conduct a SEIS to quantify the environmental impacts of

GHG emissions or explain why it failed to do so. Sierra Club, et al. v. FERC No. 16-1329, et al. (D.C. August 22, 2017)

Adorers of the Blood of Christ: Group of nuns with the help of NGOs, built a church in the proposed right of way (ROW) of a pipeline project. Transco, through eminent domain authority, condemned the property. Nuns then sued FERC claiming that the pipeline order violated the RFRA. Adorers of the Blood of Christ, et al. v. FERC No. 5:17-cv-03163 (E.D. Pa. September 28, 2017)

Delaware Riverkeeper Network: DRN argued that issuance of a 404 permit, the Army Corps did not adequately consider “practical alternatives to a pipeline project prior to issuing its permit, making the Corps action arbitrary and capricious. Del. Riverkeeper Network v. Sec'y of the Pa. Dep't of Envtl. Prot., No. 17-1533, (3d Cir. Aug. 30, 2017)

Minisink: Landowners complained FERC’s approval of compressor station did not consider impact of subsequent projects. Court found that FERC not required to address impacts of later projects, given the uncertainty, distance and distinct

timelines. Minisink Residents for Environmental Preservation and Safety, et al. v. FERC PDF No. 12-1481 (D.C. Cir. August 15, 2014)

Constitution: Pipeline brought suit against the NYSDEC for the denial of its § 401 on the grounds that NYSDEC had exceeded the statutory time limitations, and its decision was arbitrary and capricious. In a 3-0 decision the court claimed that it lacked jurisdiction to rule on timeliness, and denial of the § 401 certification

after the company refused to provide relevant information, despite repeated NYSDEC requests, was not arbitrary or capricious. Constitution Pipeline Co., LLC v. N.Y. State Dep't of Envtl. Conservation, 868 F.3d 87 (2d Cir. 2017)


9

Minisink Court Sums Up the Issue

“Given the choice, almost no

one would want natural gas

infrastructure built on their block.

“Build it elsewhere,” most would say.

The sentiment is understandable. But

given our nation’s increasing demand

for natural gas (and other alternative

energy sources), it is an inescapable

fact that such facilities must be built

somewhere…”-12-1481-Minisink Residents for Enviro., et al v. FERC

Shippers Need to Weigh in

In Closing…

CONCURRENT SESSION A: BEST PRACTICES IN OIL & GAS PIPELINE TRANSACTIONS DURING TIMES OF UNCERTAINTY

Renaissance Downtown Hotel, Washington, D.C. October 16th 2:45 -4:00

Getting the Deal Done: Managing Risk Perspectives and Funding

Christopher CrossLatham & Watkins LLP



Fundamental Sources of UncertaintySome are net positive to closing pipeline transactions, some less so…

▪ U.S. rig count at the highest level in several years despite low prices – supported by funds, SPACs and other investors

▪ Midstream consolidation and restoration of FERC quorum

▪ Energized opposition and more focused attention on what have always been normal construction issues

▪ Shipper credit concerns and for gathering systems, treatment of acreage dedications in insolvency

▪ What is the competition doing? Continuing need to maintain first-mover advantage in key markets

▪ Volatile investor perceptions of MLPs

▪ NAFTA, U.S. – Mexico and Canada relations and support for cross-border pipelines and middle-class growth

▪ Financing source credit and execution concerns over public perceptions, liability and deal structures

▪ Refined product inventories reducing, distillate demand rising, reduced Canadian heavy takes; recovering NGLs demand

4Source: Thomson One

Pipeline M&A Trends

0

2

4

6

8

10

12

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

1Q 2016 2Q 2016 3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017

Pipeline M&A

5Source: Thomson One

Pipeline Debt Offering Trends

0

1

2

3

4

5

6

7

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

1Q 2016 2Q 2016 3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017

Pipeline Debt Offerings

6Source: Pitchbook

Private Equity Trends

*Industries: Energy Storage, Transportation, Infrastructure

0

5

10

15

20

25

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

1Q 2016 2Q 2016 3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017

Private Equity Investment

Recent Deals

Page 7

Sale by Energy Transfer Partners of a minority interest in ET Rover Pipeline, a pipeline designed to transport domestically produced natural gas, to Blackstone Capital Partners.

ET Rover Pipeline, LLC

USA Pending

US$1,570,000,000

Merger between JP Energy Partners and American Midstream Partners, to create a diversified midstream business operating in North American basins, including the Permian, Gulf of Mexico, Eagle Ford and Bakken.

JP Energy Partners LP

USA 2017

US$456,000,000

Acquisition by Enbridge Energy, a subsidiary of Enbridge, of a 47.05% stake in Midcoast Energy Partners, a company engaged in gathering, processing, treating, transporting, and marketing natural gas and natural gas liquids.

Midcoast Energy Partners, L.P.

USA 2017

US$170,000,000

Enable Midstream Partners, LP 4.4% Senior Notes due 2027

Enable Midstream Partners, LP

USA 2017

US$700,000,000

Summit Midstream Holdings, LLC 5.75% Senior Notes due 2025

Summit Midstream Holdings, LLC

USA 2017

US$500,000,000

Acquisition by SemGroup Corp, of Houston Fuel Oil Terminal, a local operator of oil terminals, from AlindaCapital Partners, a US private equity firm.

Houston Fuel Oil Terminal, Inc.

USA 2017

US$1,985,000,000

Acquisition by Zenith Energy US of Arc Logistics Partners, a company engaged in the terminaling, storage, and transloading of crude oil and petroleum products, from Lightfoot Capital Partners, an investment company.

Arc Logistics Partners, LP

USA 2017

US$615,000,000

Acquisition by Plains All American Pipeline of Alpha Holding Co, a midstream oil and gas company, from Concho Resources and Frontier Midstream Solutions.

Alpha Holding Co, LLC

USA 2017

US$1,216,000,000

Acquisition by Andeavor Logistics of Western Refining Logistics, a midstream energy company that transports crude oil and refined and other products through terminals and pipelines, from AndeavorCorp.

Western Refining Logistics, LP

USA 2017

US$1,851,000,000

Acquisition by Quantum Energy Partners, a private equity firm, of a 50% interest in CONE Gathering and CONE Midstream Partners from Noble Energy, Inc.

CONE Midstream Partners, LPCONE Gathering, LLC

USA 2017

US$765,000,000

Financing Midstream Risk

▪ Funding sources understand the developer perspective▪ Support initiative, allow flexibility, partner through the inevitable obstacles

▪ Developers understand the financiers’ perspective▪ De-risk cost overruns and schedule delay, maintain the underwrite credit, protect / grow value

▪ The road to understanding is paved by legal counsel▪ Management team – competitive position, construction, marketing, operations, capital efficiency and liquidity

▪ Shippers – the anchors and the others

▪ Equity investors – private and public investor perspectives

▪ Debt providers – bank / institutional

Equity and Debt Share Many Focus Points

▪ Management team experience and commitment

▪ Cost overruns, schedule delays and contingent capital commitments

▪ FERC and state regulatory permitting timelines and milestones

▪ Environmental studies, engineering, permitting and compliance

▪ Core shipper credit underwriting assumptions

▪ Shipper commitments, reliability and resource access, credit events, replacements

▪ Anchor capacity and flexibility to diversify

▪ Approvals and parameters around expansions, new interconnections, debottlenecking / loops

▪ “Building the business” versus “messing with my assumptions / collateral”

▪ Construction management

▪ Contracting interfaces and gap risk, ROWs, Operator accountability

The Lender’s Perspective Runs Through the Contract

Key threshold funding, drawstop and operational issues – seen through reporting, CPs, covenants and default triggers

▪ Permits and approvals – threshold funding conditions and drawstop events

▪ Environmental studies, engineering, permitting and compliance

▪ What standards apply -- Equator Principles versus West Texas

▪ ROW budget, schedule and condemnation timing – progress on the ground

▪ Core shipper credit underwriting assumptions

▪ Restrain replacements, credit degradation, loss of commitments

▪ Approvals and parameters around new interconnections, debottlenecking, loops and expansions

▪ Protecting the base case in covenants

▪ Construction management

▪ Cost and budget

▪ Change of Control

The Equity’s Perspective Runs Through the Board

Mediating the entrepreneurial and fiduciary perspectives

▪ Asset or portfolio investment versus management team investment

▪ Pipeline or portfolio joint venture or anchor investor investments start with the same asset-level issues as asset debt financing but add more complexity

▪ Scope of capital commitment and cost overruns

▪ Returns to investors and management

▪ Scope of management rights and affiliate relationships

▪ Expansion of the business and return expectations

▪ AMIs

▪ Transfers, management and equity lock-ins and exits

▪ Private equity: realistically engaging with normal LP and GP constraints on commitments, exposure, and tenor

Getting the Deal Closed – The Lawyer’s Role

▪ Helping build relationships: demonstrating from initial kick-off through the financing process qualities of organization, coordination, project management expertise and realism on substance and schedule

▪ Understand the capital structure and current asset, growth and reserve objectives

▪ Facilitate close encounters of a new kind – project management teams and funding sources

▪ Develop CPs to funding or initial capital commitments that track objective milestones – and ensure they can be met

▪ Realistic budget, change order, reporting, schedule and operational covenants in debt documents

▪ Constructive engagement for inevitable waivers and Force Majeure events in debt documents

▪ Know what management rights and transparency equity and management must have

▪ Craft realistic transfer restrictions and exit options

▪ Define the developer /operator’s autonomy crisply and manage affiliate transactions and multi-asset services and resources

Thank you

▪ Questions?

2017 Mid-Year Energy Forum

Resource MaterialSurviving the Deal

160 FERC ¶ 61,065 UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Neil Chatterjee, Chairman; Cheryl A. LaFleur, and Robert F. Powelson. Millennium Pipeline Company, L.L.C. Docket No. CP16-17-000

DECLARATORY ORDER FINDING WAIVER UNDER SECTION 401 OF THE CLEAN WATER ACT

(Issued September 15, 2017)

1. On July 21, 2017, Millennium Pipeline Company, L.L.C. (Millennium) filed a Request for Notice to Proceed with Construction of its Valley Lateral Project in Orange County, New York.1 To receive a notice to proceed, Millennium must demonstrate that it has obtained all federally-required environmental permits and authorizations, or waiver thereof, including authorizations under the Clean Water Act (CWA). Millennium states in its request that the New York State Department of Environmental Conservation (New York DEC) waived its authority to issue a water quality certification under section 401 of the CWA by failing to act before the statutorily-imposed deadline. By comment filed on July 25, 2017, New York DEC asserts that it did not waive its section 401 authority. On August 30, 2017, New York DEC denied Millennium’s application for certification.

2. For the reasons discussed below, we find that the New York DEC, by failing to act within the one-year timeframe required by the CWA, waived its authority to issue or deny a water quality certification.

I. Background

3. On November 13, 2015, Millennium applied for a certificate of public convenience and necessity pursuant to section 7 of the Natural Gas Act (NGA) requesting authorization to construct and operate the Valley Lateral Project in Orange County, New York. The project will consist of 7.8 miles of 16-inch-diameter pipeline and related facilities, and will provide 127,200 dekatherms per day of incremental firm transportation service to the Valley Energy Center in the Town of Wawayanda, New York. The

1 Millennium Pipeline Co., L.L.C. July 21, 2017 Request for Notice to Proceed.

Docket No. CP16-17-000 - 2 -

Commission granted a certificate of public convenience and necessity to Millennium authorizing the project on November 9, 2016 (Certificate Order).2 The Certificate Order requires Millennium to file documentation that it has received all authorizations required under federal law, or evidence of waiver thereof, including certification under section 401 of the CWA, prior to commencing construction.3

4. Similarly, section 401 prohibits any construction activity which may result in a discharge into navigable waters until the applicant obtains a water quality certification (certification) or such certification has been waived. Section 401 of the CWA reads, in part:

Any applicant for a Federal license or permit to conduct any activity including, but not limited to, the construction or operation of facilities, which may result in any discharge into the navigable waters, shall provide the licensing or permitting agency a certification from the State in which the discharge originates or will originate. . . . If the State, interstate agency, or Administrator, as the case may be, fails or refuses to act on a request for certification, within a reasonable period of time (which shall not exceed one year) after receipt of such request, the certification requirements of this subsection shall be waived with respect to such Federal application. No license or permit shall be granted until the certification required by this section has been obtained or has been waived as provided in the preceding sentence.4

5. Concurrent with the Commission proceeding, Millennium applied for a section 401 certification from the New York DEC. New York DEC received Millennium’s application on November 23, 2015.5 On December 7, 2015, and June 17, 2016, New York DEC sent Notices of Incomplete Application to Millennium requesting additional information. The first notice stated that Millennium’s application was determined to be incomplete pending the Commission’s issuance of the Environmental Assessment (EA)

2 Millennium Pipeline Company, L.L.C., 157 FERC ¶ 61,096 (2016). Rehearing is

currently pending before the Commission, but the issue of water quality certification waiver was not raised.

3 Id. at Environmental Condition 9.

4 33 U.S.C. § 1341(a)(1) (2012) (emphasis added).

5 Millennium described its application as “containing nearly 1200 pages of analysis and construction details, including explanations of how water quality would be protected.” Millennium Request for Notice to Proceed at 2.

Docket No. CP16-17-000 - 3 -

for the project. The Commission’s EA was issued on May 9, 2016. The second notice requested additional information regarding potential impacts on three protected species and minor clarifications regarding previously-submitted data. Millennium provided responses on August 16 and 31, 2016.

6. After the Commission issued the November 9, 2016 Certificate Order, New York DEC informed Millennium that, “regardless of any action by FERC, including the issuance of a Certificate of Public Convenience and Necessity […], no construction activities may commence with respect to the Project unless the [section 401] Application is approved and [the New York DEC] issues a [certification].”6

7. In December 2016, Millennium petitioned the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) under section 19(d)(2) of the NGA alleging that the New York DEC unlawfully delayed action on the water quality certification and waived its authority under CWA section 401.7 In an opinion issued on June 23, 2017, the D.C. Circuit dismissed Millennium’s petition on jurisdictional grounds.8 Although the Court noted that the CWA “makes clear that waiver occurs after one year of agency inaction,”9 it concluded that Millennium needed to return to the Commission and “present evidence of the Department’s waiver.” 10 If the Commission denied the company’s claim, Millennium could then seek review of the Commission’s action. Because the Court did not rule on the merits, it did not determine whether New York DEC waived its authority under section 401 of the CWA, nor did it decide what would be the triggering event for section 401’s one-year deadline for action.

8. On July 21, 2017, Millennium filed with the Commission a Request for Notice to Proceed with Construction of the Valley Lateral Project. In its request, Millennium

6 New York State Department of Environmental Conservation November 18, 2016

Letter.

7 15 U.S.C. § 717r(d)(2) (2012) (providing original and exclusive jurisdiction in the D.C. Circuit for the review of the alleged failure to act by federal or state agency on an application for a permit required under federal law, other than the Coastal Zone Management Act).

8 Millennium Pipeline Co., L.L.C. v. Seggos, 860 F.3d 696, 698 (D.C. Cir. 2017) (finding that Millennium has no cognizable injury and therefore lacks standing).

9 Id. at 700 (citing 33 U.S.C. § 1341(a)(1)).

10 Id. at 701.

Docket No. CP16-17-000 - 4 -

alleged that the New York DEC waived its authority to issue a section 401 certification by failing to act within one year of receiving Millennium’s application on November 23, 2015.

9. On July 26, 2017, New York DEC filed comments disagreeing with the contention that the “CWA Section 401 Water Quality Certification has been waived” for the Valley Lateral Project. New York DEC stated that it has one year from the date a complete certification application was received to render its decision, which, with respect to Millennium’s application, was August 31, 2016. New York DEC does not define what it considers to be a “complete application,” but in this case it appears New York DEC considered Millennium’s application to be “complete” once it received Millennium’s August 31, 2016 response to the agency’s request for additional information. New York DEC requests that the Commission deny, or alternatively, hold in abeyance, Millennium’s request to proceed with construction until August 31, 2017.11

10. On August 30, 2017, New York DEC provided Notice that Millennium’s application for certification is deemed denied as of the date of the Notice.12 New York DEC does not, in its filing, further address the issue of whether its action on Millennium’s application is timely.13

II. Discussion

11. Millennium’s Commission-issued certificate provides that it cannot commence construction until it has obtained all applicable federal authorizations, including section 401 certification. As noted above, section 401 provides that if a state permitting agency “fails or refuses to act on a request for certification within a reasonable period of time

11 New York State Department of Environmental Conservation July 25, 2017

Comment Letter (filed July 26, 2017). New York DEC states that it “fully intends to make a final decision . . . no later than August 30, 2017.” Id.

12 New York State Department of Environmental Conservation August 30, 2017 Notice of Decision Letter (filed August 31, 2017).

13 In Attachment A to its Notice of Decision, New York DEC moves to reopen the record and stay the Commission’s November 9, 2016 Certificate Order, or in the alternative, requests rehearing and stay of the order. Because these requests, as well as New York DEC’s rationale for denying certification, are not relevant to the issue of waiver under CWA section 401, they will be addressed by the Commission in a separate order.

Docket No. CP16-17-000 - 5 -

(which shall not exceed one year) after receipt of such request, the certification requirements of [section 401] shall be waived with respect to such Federal application.”14 Commission natural gas certificate regulations do not provide any further guidance for determining whether a certifying agency has waived its section 401 authority.15

12. The crux of evaluating waiver in the instant case is determining the triggering event that began the one-year review process. Millennium argues that the one-year period began when New York DEC first received Millennium’s application on November 23, 2015. New York DEC argues that the one-year period did not begin until August 31, 2016, which is the date it received a “complete” application from Millennium, following the receipt of additional information it requested.

13. “[T]he starting point for interpreting a statute is the language of the statute itself.”16 Determining whether the plain meaning of the statutory text resolves the issue includes consideration of “the particular statutory language at issue, as well as the language and design of the statute as a whole.”17 Section 401 provides that water quality certification is waived when the certifying agency “fails or refuses to act on a request for certification, within a reasonable period of time (which shall not exceed one year) after receipt of such request.”18 Thus the term “receipt” specifies the triggering event. The dictionary definition of “receipt” is the act or process of receiving.19 Therefore, in this context, the plain meaning of “after receipt of the request” is the day the agency receives a certification application, as opposed to when the agency considers the application to be complete. Giving effect to the plain text of a statute, 20 the one-year review period began November 23, 2015, the date that New York DEC received the application.

14 33 U.S.C. § 1341(a)(1).

15 18 C.F.R. 157.206(b)(2)(i) (2017) requires compliance with the CWA, but does not provide further detail.

16 Gwaltney of Smithfield, Ltd. v. Chesapeake Bay Found., Inc., 484 U.S. 49, 56 (1987) (internal quotation and citation omitted).

17 S. California Edison Co. v. FERC, 195 F.3d 17, 23 (D.C. Cir. 1999).

18 33 U.S.C. § 1341(a)(1) (emphasis added).

19 Definition of Receipt, MERRIAM-WEBSTER.COM, https://www.merriam-webster.com/dictionary/receipt (last visited August 14, 2017).

20 W. Minn. Mun. Power Agency v. FERC, 806 F.3d 588, 592-93 (D.C. Cir. 2015).

Docket No. CP16-17-000 - 6 -

14. To the extent there is any ambiguity in the statutory text, we interpret the triggering date for the waiver provision to be the date a certification application is filed with the relevant agency. Our interpretation is consistent with Congress’s intent, given that Congress explained that the review period of one year was established to “ensure that sheer inactivity by the State … will not frustrate the federal application.”21

15. Moreover, Commission precedent supports the conclusion that the triggering event is the date of receipt of a certification request. In Georgia Strait Crossing Pipeline LP,22 the Commission found that the Washington Department of Ecology had waived its section 401 authority after it denied the pipeline’s certification request more than two years after receipt. The state argued that the one-year period began when the U.S. Army Corps of Engineers (Corps) issued notice of an application for a permit under section 404 of the CWA. The Commission disagreed, stating that “[t]he clear and unambiguous language in Section 401(a)(1) required Ecology to act within one year of receiving [the] request for Section 401 certification.”23 Likewise, in AES Sparrows Point LNG, AES was required to obtain section 401 certification and a section 404 permit before proceeding with construction of its liquefied natural gas terminal.24 AES argued that the Maryland Department of the Environment had waived section 401 authority by failing to act on the request within one year of receipt of the company’s application. Maryland contended that the one-year clock began with the issuance by the Commission and the Corps of a joint public notice of availability of the draft Environmental Impact Statement in the proceeding. The Commission found the “triggering event to be—as specified in the statute—the ‘receipt of’ the request for a water quality certification” and determined that Maryland waived certification.25

21 Clean Water Act 1970 Amendments Conference Report, H.R. Conf. Rep. 91-

940 (1970), reprinted in 1970 U.S.C.C.A.N 2691, 2741.

22 107 FERC ¶ 61,065 (2004).

23 Id. at P 7.

24 AES Sparrows Point LNG, LLC, 126 FERC ¶ 61,019 (2009) (Order Issuing Certificate).

25 AES Sparrows Point LNG, LLC, 129 FERC ¶ 61,245, at P 61-63 (2009) (Order on Rehearing and Clarification and Denying Stay). While rehearing was pending at the Commission, AES also brought the waiver issue to court, filing a petition for review with the United States Court of Appeals for the Fourth Circuit, against the Maryland Department of the Environment. The court, in an order issued five days after the Commission’s rehearing order, determined that Maryland had not waived its section 401 authority, but only after determining that the Corps’ interpretation that only a complete

Docket No. CP16-17-000 - 7 -

16. The Commission’s hydropower regulations and case law, as well as court precedent, also support the conclusion that the one-year waiver period begins upon receipt of the application. The regulations directly address the issue, stating: “[a] certifying agency is deemed to have waived the certification requirements of section 401(a)(1) of the Clean Water Act if the certifying agency has not denied or granted certification by one year after the date the certifying agency received a written request for certification.”26 Prior to the adoption of this regulation, the Commission’s “practice [had] been to deem the one-year waiver period to commence when the certifying agency finds the request acceptable for processing.”27 In 1987, the Commission promulgated section 4.34(b)(5)(iii) of its regulations to make clear that receipt of a certification application was the triggering event.28 Since 1987, the Commission has found “the language and intent of the Clean Water Act to be clear, and our regulations, [section 4.34(b)(5)(iii)], provide that failure to meet the one-year deadline will constitute waiver.”29 Judicial opinions have been consistent with this interpretation. The D.C. Circuit has noted that:

Section 401(a)(1) requires that a State “act on a request for certification[] within a reasonable period of time (which shall not exceed one year) after receipt of such request,” or else “the certification requirements of this subsection shall be waived with respect to such Federal application.” 33 U.S.C. § 1341(a)(1). In imposing a one-year time limit on States to “act,” Congress plainly intended to limit the amount of time that a State could delay a federal licensing proceeding without making a decision on the certification request. This is clear from the plain text. Moreover, the Conference Report on Section 401 states that the time limitation was meant

certification request, as determined by the Corps, would trigger the one-year waiver period, was entitled to Chevron deference. AES Sparrows Point LNG, LLC v. Wilson, 589 F.3d 721 (4th Cir. 2009). The Commission was not a party to that case nor was the Commission’s interpretation of section 401 at issue.

26 18 C.F.R. § 4.34(b)(5)(iii) (2017) (emphasis added). There is no corresponding Commission regulation under the NGA.

27 Waiver of the Water Quality Certification Requirements of Section 401(a)(1) of the Clean Water Act, Order No. 464, 52 Fed. Reg. 5446-01, 5446 (Feb. 23, 1987) (citing Washington County Hydro Development Associates, 28 FERC ¶ 61,341 (1984)).

28 Id.

29 E.g., Central Vermont Public Service Corp., 113 FERC ¶ 61,167, at P 21 (2005).

Docket No. CP16-17-000 - 8 -

to ensure that “sheer inactivity by the State ... will not frustrate the Federal application.” H.R. Rep. 91-940, at 56 (1970), reprinted in 1970 U.S.C.C.A.N. 2691, 2741. Such frustration would occur if the State’s inaction, or incomplete action, were to cause the federal agency to delay its licensing proceeding.30

The Ninth Circuit also appears to have approved of the Commission’s regulatory approach.31

17. Here, consistent with our precedent in both NGA cases and hydroelectric licensing proceedings under the Federal Power Act, we conclude that the triggering date for waiver under section 401 of the CWA as the date the certifying agency receives a certification application. In this case, New York DEC received Millennium’s formal written application on November 23, 2015. By failing to act on Millennium’s request for certification by November 23, 2016, we find that the agency waived its certification authority. To find otherwise would frustrate the purpose of the one-year review period specified by the CWA and allow state agencies to indefinitely delay proceedings by determining applications to be incomplete.

18. This does not leave a state water quality certifying agency without remedy. If a state agency concludes that a certification application does not meet CWA requirements, it can deny the application. New York DEC declined to take that step or to otherwise timely act on Millennium’s application. Accordingly, it waived its certification authority.

The Commission orders: The New York State Department of Environmental Conservation has waived its water quality certification authority under section 401 of the Clean Water Act with respect to the Millennium Pipeline Company Valley Lateral Project, CP16-17-000. By the Commission. ( S E A L )

Nathaniel J. Davis, Sr., Deputy Secretary.

30 Alcoa Power Generating Inc. v. FERC, 643 F.3d 963, 972 (D.C. Cir. 2011).

31 See State of California ex. rel. State Water Resources Control Bd. v. FERC, 966 F.2d 1541, 1553-54 (9th Cir. 1992) (discussing the Commission’s approach to establish the triggering event as when the certifying agency received the request).

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 3, 2017 Decided June 23, 2017

No. 16-1415

MILLENNIUM PIPELINE COMPANY, L.L.C., PETITIONER

v.

BASIL SEGGOS AND NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION,

RESPONDENTS

CPV VALLEY, LLC, INTERVENOR

On Petition for Review from the New York State Department of Environmental Conservation

Catherine E. Stetson argued the cause for petitioner. With her on the briefs was Sean Marotta.

Elizabeth W. Whittle was on the brief for intervenor CPV Valley, LLC in support of petitioner.

Brian M. Lusignan, Assistant Attorney General, Office of the Attorney General for the State of New York, argued the cause for respondents. With him on the brief were Eric T. Schneidermann, Attorney General, Barbara D. Underwood,

USCA Case #16-1415 Document #1680986 Filed: 06/23/2017 Page 1 of 12

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Solicitor General, Frederick A. Brodie, Assistant Solicitor General, and Lisa M. Burianek, Deputy Bureau Chief.

Before: TATEL, SRINIVASAN, and WILKINS, Circuit Judges.

Opinion for the Court filed by Circuit Judge SRINIVASAN. SRINIVASAN, Circuit Judge: Millennium Pipeline

Company, L.L.C., would like to extend its existing natural gas pipeline in Orange County, New York. Before it can break ground, however, it must gain the approval of the Federal Energy Regulatory Commission (FERC). Millennium must also comply with environmental regulations like the Clean Water Act, which requires it to show that its pipeline will meet all applicable water-quality requirements. 33 U.S.C. § 1341(a)(1).

As part of that permitting process, Millennium submitted

an application for a water-quality certificate to the New York State Department of Environmental Conservation. More than a year has passed, but the Department has taken no formal action on Millennium’s application. Millennium now asks us to compel the Department to act on the application.

We dismiss Millennium’s petition for review. Even if the

Department has unlawfully delayed acting on Millennium’s application, its inaction would operate as a waiver, enabling Millennium to bypass the Department and proceed to obtain approval from FERC. The Department’s delay, then, causes Millennium no cognizable injury. Millennium therefore lacks standing to proceed with its petition.


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I.

A.

For any company desiring to construct a natural gas pipeline, all roads lead to FERC. The Natural Gas Act of 1938 vests the agency with “exclusive jurisdiction” over the interstate transportation of natural gas. Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 300-01 (1988). No company or person may construct a natural gas pipeline without first obtaining “a certificate of public convenience and necessity” from the agency. 15 U.S.C. § 717f(c).

Before FERC can issue a certificate of public convenience,

the agency must ensure that the proposed pipeline complies with all applicable federal, state, and local regulations. See 15 U.S.C. § 717b(d); 18 C.F.R. § 4.38. The Clean Water Act, the statute at issue in this case, is one such regulatory regime. See 33 U.S.C. § 1341(a)(1); 15 U.S.C. § 717b(d)(3). Because Millennium’s proposed pipeline would traverse several streams in southern New York, the Clean Water Act requires the State to certify that any discharge from the pipeline will comply with the Act’s water-quality requirements. 33 U.S.C. § 1341(a)(1). FERC cannot sign off on the construction until New York either grants a water-quality certificate or waives the Act’s requirements. See id.

To prevent state agencies from indefinitely delaying

issuance of a federal permit, Congress gave States only one year to act on a “request for certification” under the Clean Water Act. Alcoa Power Generating Inc. v. FERC, 643 F.3d 963, 972 (D.C. Cir. 2011) (quoting 33 U.S.C. § 1341(a)(1)). That deadline is established by section 401 of the Act, which requires a State to grant or deny the certificate “within a reasonable period of time (which shall not exceed one year)


4

after receipt of [a] request.” Id. If the State fails to act within that period, the Act’s “certification requirements” are deemed “waived,” such that the pipeline no longer needs a water-quality certificate to begin construction. Id.

B.

On November 9, 2016, FERC issued a provisional

certificate of public convenience for Millennium’s proposed project, a 7.8-mile extension of its existing natural gas pipeline. The Commission, however, conditioned its approval on proof of Millennium’s receipt of “all authorizations required under federal law,” including the Clean Water Act. Millennium Pipeline Co., 157 FERC ¶ 61,096, 2016 WL 6662548, at *35 (2016). To that end, Millennium must present FERC with documentation of the applicable permits or evidence of waiver thereof. Id.

Millennium had previously applied for a water-quality

certificate from the New York State Department of Environmental Conservation. The Department received Millennium’s request on November 23, 2015, and responded by sending Millennium a notice of incomplete application. Over the next year, the Department sent Millennium several requests for supplemental information. Millennium has complied with the Department’s requests each time. In November 2016, the Department wrote a letter indicating that Millennium had “fully responded” to its requests, but it would “continue its review of the Application, as supplemented, to determine if a valid request for a [water-quality certificate] has been submitted.” N.Y. State Dep’t of Envtl. Conservation, Letter on Application for Section 401 Water Quality Certification, Freshwater Wetlands and Protection of Waters Permit (Nov. 18, 2016). The Department stated that it had “at


5

a minimum, until August 30, 2017 to either approve or deny the Application.” Id.

Frustrated by the agency’s delay, Millennium brought a

petition for review in this Court under section 19(d)(2) of the Natural Gas Act. That provision gives us “original and exclusive jurisdiction” to review “an alleged failure to act by a . . . State administrative agency acting pursuant to Federal law to issue, condition, or deny any permit required under Federal law.” 15 U.S.C. § 717r(d)(2). If we find that an agency has delayed unlawfully, the Act requires us to remand the proceeding to the agency and “set a reasonable schedule and deadline for the agency to act on remand.” Id. § 717r(d)(3).

Millennium argues that the Department failed to act within

the Clean Water Act’s one-year statutory window, and therefore asks us to compel the Department either to grant its application or to take action within a specified schedule. The Department counters that it need only act within one year of receiving a complete or valid application, and it alleges Millennium has repeatedly failed to meet that requirement.

II.

Before reaching the merits of Millennium’s claim, we first

examine Millennium’s standing to sue. Article III of the Constitution limits our jurisdiction to “Cases” and “Controversies.” U.S. Const. art. III, § 2, cl. 1. To satisfy the case-and-controversy requirement, a petitioner must allege (i) that it suffered an injury in fact; (ii) that a causal connection exists between the injury and challenged conduct; and (iii) that it is likely, as opposed to speculative, that the injury will be redressed by a favorable decision. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61 (1992).


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Millennium fails at the first prong. It asks us to hold that the Department violated the Clean Water Act’s statutory deadline. Even if that were so, Millennium would suffer no cognizable injury from the violation. We therefore dismiss Millennium’s petition for want of standing.

A.

All agree that the Clean Water Act gave the Department a

“reasonable period of time (which shall not exceed one year)” to act on Millennium’s application. 33 U.S.C. § 1341(a)(1). Millennium thus does not purport to have suffered any injury from the Department’s inaction within that period. Millennium instead challenges the Department’s continued, allegedly unlawful delay, which it claims will prevent it from constructing its pipeline.

Even if the Department has unlawfully delayed, however,

it can no longer prevent the construction of Millennium’s pipeline. Millennium ultimately needs one permit to begin construction on its pipeline: the certificate of public convenience from FERC. Typically, the Clean Water Act poses a hurdle to obtaining that certificate. The Act forbids any federal agency from granting a license or permit until the “certification required by [the Act] has been obtained or has been waived.” 33 U.S.C. § 1341(a)(1) (emphasis added). That provision also makes clear that waiver occurs after one year of agency inaction. Id.

Once the Clean Water Act’s requirements have been

waived, the Act falls out of the equation. Id. As a result, if the Department has delayed for more than a year—as Millennium alleges—the delay cannot injure Millennium. Instead, the delay triggers the Act’s waiver provision, and Millennium then


7

can present evidence of waiver directly to FERC to obtain the agency’s go-ahead to begin construction.

We have previously dismissed a petition for review for lack of standing when faced with highly similar allegations of state inaction. See Weaver’s Cove Energy, LLC v. R.I. Dep’t of Envtl. Mgmt., 524 F.3d 1330, 1332 (D.C. Cir. 2008). That case, like this one, involved a petition for review under section 19(d)(2) of the Natural Gas Act. The petitioner, a natural gas company, claimed that two state agencies had failed to process its applications within the Clean Water Act’s one-year deadline. Id. Although the state agencies had acted by the time the petitioner sought judicial review (one had provisionally denied the certificate, while another had granted it), the petitioner asked for a declaration that the agencies had waived any right to deny its applications. Id.

The petitioner in Weaver’s Cove, as here, asserted its

standing was “self-evident” because it was the object of delayed agency action. See id. at 1333. But we held that “[e]ven a final adverse decision would not support” the petitioner’s standing. Id. Instead, the petitioner’s theory ultimately was that “it benefited from the agencies’ inaction”: by delaying, the agencies had forfeited their opportunity to deny the water-quality certificate. Id. If the petitioner was correct, we explained, the agencies could not block the pipeline’s construction even if they went on to deny the permit outright, because any decision “would be too late in coming and therefore null and void.” Id. The same is true here. If the Clean Water Act’s requirements are waived, there is nothing left for the Department—and therefore for this Court—to do. Under the Natural Gas Act, if a reviewing court finds that an agency has unlawfully delayed, the court “shall remand the proceeding to


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the agency to take appropriate action consistent with the order of the Court” and “shall set a reasonable schedule and deadline for the agency to act on remand.” 15 U.S.C. § 717r(d)(3). Millennium contends that we should require the Department to grant its application, or, at minimum, should set a deadline for the Department’s decision. But to what effect? If we were to determine the Department exceeded the Clean Water Act’s deadline, we necessarily would conclude the Clean Water Act’s requirements have been waived. At that point, the Department’s decision to grant or deny would have no legal significance.

So what can Millennium do in the face of the Department’s continued inaction? Millennium can go directly to FERC and present evidence of the Department’s waiver. To be sure, FERC could ultimately decline to find waiver. But in that event, FERC—not the Department—would be blocking the construction. See Weaver’s Cove, 524 F.3d at 1333. Millennium could immediately appeal any adverse FERC decision on the waiver question to this Court under section 19(b) of the Natural Gas Act, which affords judicial review to parties aggrieved by FERC’s orders. See Alcoa, 643 F.3d at 968; 15 U.S.C. § 717r(b). And insofar as Millennium has concerns that FERC might itself delay action, the present petition under section 19(d)(2) could not support our review in any event: that provision targets state agencies, and thus can provide no basis to force FERC’s hand.

Millennium suggests that the Department might stand as an independent barrier to construction even if FERC issues a final certificate of public convenience. Millennium cites a letter in which the Department “reminds” the company that, “regardless of any action by FERC, . . . no construction activities may commence” unless the Department issues a water-quality certificate. See N.Y. State Dep’t of Envtl.


9

Conservation, Letter on Application for Section 401 Water Quality Certification, Freshwater Wetlands and Protection of Waters Permit (Nov. 18, 2016). That letter, however, does not purport to say that the Department would retain independent authority to stop construction even if FERC were to issue a certificate of public convenience. As the Department acknowledged at oral argument, if FERC issues a certificate of public convenience, Millennium would have all the authority it needs to begin construction. See Oral Arg. Tr. 19:10-18; see also 15 U.S.C. § 717b(e). And if the Department were to disagree with FERC’s decision, the Department’s recourse would be to seek review in this Court pursuant to section 19(b). See 15 U.S.C. § 717r(b). Otherwise, the Department could no longer block Millennium’s construction.

B. In 2005, Congress amended section 19(d) of the Natural

Gas Act to allow this Court to compel action from foot-dragging agencies. See Energy Policy Act of 2005, Pub. L. 109-58, 119 Stat. 594, 690 (2005). Millennium, joined by intervenor CPV Valley, argues that our interpretation would render Congress’s amendments toothless. We disagree. As amended, section 19(d)’s judicial review provisions have full force when, unlike with the Clean Water Act, there is no built-in remedy for state inaction already in place.

The Clean Water Act’s certification requirements, as

explained, automatically expire after one year of agency delay. 33 U.S.C. § 1341(a)(1). Not all federal and state regulations include that type of waiver provision, however. In those circumstances, Congress recognized that state agencies could effectively block the construction of natural gas pipelines by indefinitely delaying action on permit applications. Congress amended the Natural Gas Act to ensure that “sheer inactivity


10

by the State” could not frustrate “the Federal application” process. See H.R. Rep. 91-940, at 55 (1970) (Conf. Rep.), as reprinted in 1970 U.S.C.C.A.N. 2712, 2741.

Our decision today has no effect on situations in which a

State’s “sheer inactivity” could actually frustrate the federal permitting process. Consider our decision in Dominion Transmission, Inc. v. Summers, 723 F.3d 238, 243 (D.C. Cir. 2013). There, we reviewed a petition brought under section 19(d)(2) for a state agency’s alleged failure to act on a Clean Air Act permit. Id. at 242. Less than a month after receiving the request, the state agency informed the applicant “it would not be able to process the application.” Id. There was no argument in Dominion Transmission that the state agency’s inaction operated as a waiver under the Clean Air Act, as the Act’s 18-month deadline for agency action had yet to run. See 42 U.S.C. § 7661b(c). We held that the agency had failed to justify its refusal to act on the application, and, pursuant to section 19(d)(3), we remanded to the agency with instructions to complete the permitting process within a reasonable timeframe. Id. at 245.

Likewise, a state agency’s failure to comply with

applicable FERC deadlines could trigger judicial review under section 19(d)(2). In its 2005 amendments to the Natural Gas Act, Congress authorized FERC to set a schedule for all federal permits. 119 Stat. at 689. Pursuant to that authority, FERC generally requires States to act within 90 days of the Commission’s issuance of its own environmental report “unless a schedule is otherwise established by Federal law.” 18 C.F.R. § 157.22. The Natural Gas Act requires state agencies to “comply with the deadlines established by the Commission,” 15 U.S.C. § 717n(b)(2), and if a state agency exceeds FERC’s deadline, the applicant could pursue remedies under section 19(d), id. § 717n(c)(2). Because FERC’s schedules do not


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include a waiver provision, we could remand to any delaying agency with instructions to act on the application. See id. § 717r(d)(3).

Along those lines, Millennium initially suggested in this

case that the Department, in addition to exceeding the Clean Water Act’s statutory deadline, also failed to comply with FERC’s schedule (which required state agencies to act by August 7, 2016). Millennium did not reiterate that argument in its reply brief, however. And at oral argument, Millennium indicated that the Department’s failure to meet FERC’s deadline, rather than presenting a freestanding basis for relief, simply bore on whether the agency had acted within a “reasonable time” under the Clean Water Act’s waiver provision. Oral Arg. Tr. 13:12-16. To the extent Millennium’s argument folds into its Clean Water Act claim in that fashion, Millennium lacks standing for the reasons discussed above. And even if Millennium sought to make a separate argument about FERC’s schedule, it would lose on the merits. FERC’s regulations specify that its deadlines under the Natural Gas Act apply “unless a schedule is otherwise established by Federal law.” 18 C.F.R. § 157.22 (emphasis added). The Clean Water Act, a federal law, establishes just such a statutory schedule. In fact, FERC anticipated that agencies acting pursuant to the Clean Water Act would not be bound by its deadlines. See Regulations Implementing the Energy Policy Act of 2005, 71 Fed. Reg. 62,912, 62,915 n.18 (Oct. 27, 2006). The Clean Water Act thus provides the only applicable deadline for our purposes.


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* * * * *

For the foregoing reasons, the petition for review is dismissed.

So ordered.


COMMERCIAL APPROACH TO RISKREGULATORY RISKS AND CONTRACTUAL COMPLEXITIES

Bill WolfKinder Morgan Inc.



Commercial Approach to Risk(Regulatory Risks and Contractual Complexities…)Bill Wolf, Kinder Morgan

▪ What is important to customers and project developers?▪ Customers want certainty of project and cost

▪ Developers want firm commitments and risk mitigation

▪ So what shared goals do we see between customers and developers?▪ The development of new energy infrastructure to provide long term solutions to customer needs

▪ Stable, predictable and long-term sanctity of contract terms and commercial relationships


▪ How does one contract around regulatory risk?▪ Identification of Risks▪ Depends on location, jurisdiction, product and politics▪ Openness of communication between counterparties prior to contract execution▪ The old saying of “an ounce of protection is worth pounds of cure” is fitting!

▪ Shared Management of Risks▪ Customers and developers have different expertise – use them!▪ Understand the full contract value stream and how project risks impact indirect but connected components of

larger transactions


▪ Contractual provisions becoming increasingly important

▪ Conditions Precedent ▪ Timing goals and milestones for achieving them▪ Stated expectations and understandings▪ Extended timeframes for FID, Board Approvals, Regulatory Approvals

▪ Contract pricing re-openers ▪ Reopeners can be based on material pricing, project delays, or occurrence of other unanticipated

events▪ Need to be specific and have common understanding drafted with specificity into contracts


▪ Termination Rights▪ Failure to satisfy Conditions Precedent – cure rights or walk rights?

▪ Timing delay as a termination right or not

▪ Importance of communicating project requirements to regulators

▪ Need for confidentiality in public filing of contracts

▪ Contract Interpretation Issues▪ Oftentimes regulatory approvals or milestone achievements have a level of discretion and effort

attached to them. ▪ “best efforts” versus “commercially reasonable efforts”▪ “reasonable discretion” versus “sole discretion”


▪ Lessons Learned?▪ Be clear and concise in expectations set by contract. Even in the recitals.

▪ Be specific in conditions precedent, so that ambiguity around achieving certain CPs is left to little discretion.

▪ Understand springing termination rights and what actions can cause contracts to terminate either automatically or by discretion.

▪ Choose language carefully when describing level of effort and discretion required in specific contract provisions.

MANAGING LEGAL RISK IN REGULATED PROJECTS · Rick Smead RBN Energy, LLC. Presentation to the....

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