Steve Horn's blog

Purposeful Distraction? Unpacking the Oil Refiners' "Bomb Trains" Lawsuit vs. Warren Buffett's BNSF

On March 13, American Fuel & Petrochemical Manufacturers (AFPM) — the oil refiners' trade association — sued oil-by-rail carrying giant Burlington Northern Santa Fe (BNSF) for allegedly violating its common carrier obligation under federal law. A DeSmogBlog investigation has revealed there may be more to the lawsuit than initially meets the eye.

Filed in the U.S. District Court for the Southern District of Texas, Houston Division, AFPM sued BNSF “for violating its common carrier obligation by imposing a financial penalty” for those carrying oil obtained via hydraulic fracturing (“fracking”) in North Dakota's Bakken Shale basin and other hazardous petroleum products in explosion-prone DOT-111 rail cars.

AFPM's beef centers around the fact that BNSF began imposing a $1,000 surcharge for companies carrying explosive Bakken fracked oil in DOT-111 cars, as opposed to “safer” CPC-1232 cars, at the beginning of 2015.

The Warren Buffett-owned BNSF did so, argues AFPM, illegally and without the authority of the federal government.

“This $1,000 surcharge on certain PHMSA-authorized rail cars breaches BNSF’s common carrier duty to ship hazardous materials under the auspices of PHMSA’s comprehensive regime governing hazardous materials transportation,” wrote AFPM's legal team, featuring a crew of Hogan Lovells attorneys. “Allowing railroads to penalize companies that ship crude oil in federally-authorized rail cars would circumvent PHMSA’s statutory and regulatory process for setting rail car standards for hazardous materials shipments.”

Upon a quick glance, it seems like a fairly straight-forward case of federal law and an intriguing example of an intra-industry dispute. But as recent history has proven, the devil is in the details.

Global Shale Fail: Oil Majors Leaving Fracking Fields Across Europe, Asia

With some analysts predicting the global price of oil to see another drop, many oil majors have deployed their parachutes and jumped from the hydraulic fracturing (“fracking”) projects rapidly nose-diving across the world.

As The Wall Street Journal recently reported, the unconvetional shale oil and gas boom is still predominantly U.S.-centric, likely to remain so for years to come.

“Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell PLC have packed up nearly all of their hydraulic fracturing wildcatting in Europe, Russia and China,” wrote The Wall Street Journal.

“Chevron halted its last European fracking operations in February when it pulled out of Romania. Shell said it is cutting world-wide shale spending by 30% in places including Turkey, Ukraine and Argentina. Exxon has pulled out of Poland and Hungary, and its German fracking operations are on hold.” 

Though the fracking boom has taken off in the U.S. like no other place on Earth, the U.S. actually possesses less than 10 percent of the world’s estimated shale reserves, according to The Journal.

Despite this resource allotment discrepency, the U.S. Energy Information Administration (EIA) recently revealed that only four countries in the world have produced fracked oil or gas at a commercial-scale: the United States, Canada, China and Argentina.

Global Shale Fail
Image Credit: U.S. Energy Information Administration

Peabody Coal Lawyer Laurence Tribe, Obama's Law Professor, Testifies in Congress vs. EPA Carbon Rule

Laurence Tribe, constitutional law professor at Harvard Law School and of-counsel at the firm Massey & Gail LLP, recently testified in front of the U.S. House Committee on Energy and Commerce against the proposed U.S. Environmental Protection Agency (EPA) carbon rule

Currently working as legal counsel for coal industry giant Peabody Energy and helping the company write comments, Tribe submitted a 57-page legal memo to accompany his five-minute testimony (starting at 22:43). In December 2014, Tribe submitted 35 pages worth of comments to the EPA on its proposed rule.

Joining Tribe were both New York University School of Law professor Richard Revesz and Hunton & Williams attorney Allison Wood, who testified for and against the Clean Power Plan, respectively. But Tribe served as the star witness and fielded most of the questions from the Committee during the question-and-answer session.

Fittingly given his distinguished legal background, Tribe argued against the Clean Power Plan on constiutional law grounds. 

“Burning the Constiution should not become part of our national energy policy,” Tribe wrote in the early pages of the legal memo he submitted to the Committee. “At its core, the issue the Clean Power Plan presents is whether EPA is bound by the rule of law and must operate within the framework established by the United States Constitution.”

He also proposed a solution — favored by his client Peabody  in a section titled, “There is a Better Way.”

“The United States could…support carbon capture and storage technologies,” Tribe wrote, not mentioning Peabody's advocacy for so-called “clean coal.” 

“An 'all of the above' energy policy can support all forms of domestic energy production that will minimize carbon emissions, protect consumers and American jobs, and ensure that the U.S. remains independent from unreliable foreign sources of energy.”

Iowa Republican Lawmaker: Rick Perry’s Involvement With Bakken Oil Pipeline “A Bad Idea”

By David Goodner and Steve Horn 

Everyday Iowa voters are less likely to caucus for former Texas governor and potential presidential candidate Rick Perry “because of his involvement” with a controversial oil pipeline proposal, according to an influential state lawmaker who has made eminent domain one of his signature issues in the Iowa House of Representatives.

Politically speaking, I am not sure there is as much upside for him to be involved as there is downside,” Iowa state representative Bobby Kaufmann (R-Wilton) told DeSmogBlog. “People would likely not vote for him for being involved with the pipeline.” 

Last month, DeSmogBlog broke news that Perry’s appointment to the Board of Directors of Energy Transfer Partners (ETP) could cost him support in the Iowa Caucuses. Energy Transfer Partners is a Texas-based company whose subsidiary, Dakota Access, LLC, has petitioned the state of Iowa to build a pipeline to transport up to 575,000 barrels per day of oil obtained from North Dakota's Bakken Shale via hydraulic fracturing (“fracking”)

Kaufmann’s statement to DeSmogBlog marks the first public criticism of Perry on this issue by a sitting Republican lawmaker. It also comes on the heels of Perry’s scheduled March 7 return to Iowa to speak at the Iowa Ag Summit alongside other likely Republican presidential candidates.

Kaufmann’s remarks to DeSmogBlog also come in the aftermath of Iowa’s paper of record, The Des Moines Register, releasing a poll finding that 74 percent of Iowans are opposed to the use of eminent domain to build the pipeline.

I think any presidential candidate’s association with eminent domain could be unhelpful” to them in the Iowa Caucuses, Kaufmann said. 

Sued by Chesapeake Energy for Stealing Trade Secrets, Aubrey McClendon Hires PR Giant Edelman

Chesapeake Energy has sued its former CEO, Aubrey McClendon, for allegedly stealing its trade secrets in the months between his resignation and the formation of his new company, American Energy Partners. To defend itself outside of the courtroom, American Energy Partners has hired Edelmanthe 'world's largest' and often controversial public relations firm.

Filed on February 17 at the District Court of Oklahoma County, Chesapeake's legal complaint alleges McClendon covertly took map-based data owned by the company in the time between resigning from the company and then officially leaving the company in early 2013. Chesapeake also alleges that he then utilized that same confidential data for business and investment decisions at his new startup in deciding which land to purchase for hydraulic fracturing (“fracking”) for oil and gas.

AEP used confidential information and trade secrets stolen by McClendon from Chesapeake as a basis for their decision to acquire certain acreage in the Utica Shale Play,” alleges the lawsuit. “Further, in acquiring this acreage…AEP interfered with Chesapeake's business plans and its negotiations for its own acquisition of acreage in the Utica Shale play.”

Chesapeake Energy alleges that, before taking the data with him, McClendon asked a former company vice president of land, whose name is redacted in the complaint, to optimize and update the data.

Chesapeake Energy v. American Energy Partners Complaint
Image Credit: District Court of Oklahoma County

Facing Felony Charges, Rick Perry Joins Board of Energy Transfer Partners, Owner of Proposed Oil Pipeline Across Iowa

Additional Reporting by David Goodner

Former Texas Republican Governor Rick Perry has joined the board of directors at Energy Transfer Partners, a natural gas and propane company headquartered in Dallas, Texas that has proposed to build a controversial Bakken crude oil pipeline across Iowa.

The announcement, which appeared in Energy Transfer Partners' February 3 Form 8-K filing to the U.S. Securities and Exchange Commission (SEC), comes as Perry faces two Texas state-level felony charges for abuse of power. Perry pleaded not guilty to both charges and District Judge Bert Richardson recently ruled against dismissing Perry's case.  

“It isn't immediately clear how much Perry will be paid for his board position,” explained the Texas Tribune. “According to regulatory filings published on the company's website, non-employee board directors were paid $50,000 a year in 2013.”

Despite the felony charges, Perry is still strongly considering a 2016 presidential run, according to a recent article published by the Associated Press, which reported he may make a final decision on whether or not to run by May. 

The Energy Transfer Partners filing to the SEC describes Perry's appointment: 

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On February 3, 2015, James R. (Rick) Perry was appointed as a director of Energy Transfer Partners, L.L.C., the general partner of Energy Transfer Partners GP, L.P., which is the general partner of Energy Transfer Partners, L.P. (the “Partnership”). Mr. Perry served as the Governor of Texas from 2000 until 2015.
There are no arrangements or understandings with the Partnership, or any other persons, pursuant to which Mr. Perry was appointed as a director of Energy Transfer Partners, L.L.C. Mr. Perry is not currently expected to be named to any committees of the board of directors of Energy Transfer Partners, L.L.C. At this time, the Partnership is not aware of any transactions, since the beginning of the Partnership’s last fiscal year, or any currently proposed transactions, in which the Partnership was or is to be a participant involving amounts exceeding $120,000, and in which Mr. Perry had or will have a direct or indirect material interest. Consistent with other non-employee members of the Board of Directors, Mr. Perry will be eligible to receive cash compensation for his service on the Board of Directors and equity compensation under the Second Amended and Restated 2008 Long-Term Incentive Plan, as described in the Definitive Proxy Statement on Schedule 14A filed by the Partnership with the SEC on October 24, 2014.


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