Energy Cases to Watch in 2019

Climate change is at the center of legal battles that energy attorneys will watch closely in 2019, headlined by a trio of cases that seek to impose climate liability on fossil fuel companies and the U.S. government.

Federal appeals courts are poised to have their say on torts brought by states, counties and cities seeking to have fossil fuel producers foot the bill for climate change-related infrastructure damage, and New York state aims to punish ExxonMobil under state securities laws for allegedly concealing climate-related business risks from investors. Meanwhile, a constitutional suit accusing the federal government of crafting climate-harming energy and environmental policies teeters on the brink of a historic trial.

Climate change also figures prominently in litigation challenging federal environmental reviews of energy development projects as well as the Trump administration's rollback of Obama-era energy and environmental regulations.

Here, Law360 takes a look at cases that energy attorneys will be watching in the coming year.

Climate Tort Litigation Against Fossil Fuel Cos.

Suits have spread from coast to coast, as several states, counties and cities seek to hold fossil fuel companies liable for climate change-related infrastructure damages. The initial playbook is pretty well-established at this point: the assertion of state-law tort claims including nuisance and trespass, and the targeted companies removing the case to federal court where they're either kept and decided or remanded to state court.

But attorneys say questions over the viability of this latest wave of climate litigation won't be answered until federal appeals courts start weighing in. The Ninth Circuit is currently mulling Oakland and San Francisco's appeal of the dismissal of their suits on grounds that global warming should be tackled by lawmakers, not courts, as well as another lower court decision that sent suits by several California cities and counties back to state court.

Meanwhile, New York City has urged the Second Circuit to revive its climate tort against Big Oil, which a lower court said is displaced by the Clean Air Act and the U.S. Environmental Protection Agency.

“We're still just figuring out whether there's enough to state a claim based upon the allegations,” said Kirkland & Ellis LLP partner Anna Rotman, who is representing an oil and gas company in several climate torts. “Depending on how the circuit courts rule, we could see the dismissals upheld and say that's the end of that, but if it's remanded we will, for the first time, go to discovery on this issue."

The cases are County of San Mateo v. Chevron Corp. et al., case number 18-15499, and City of Oakland et al. v. BP PLC et al., case number 18-16663, both in the U.S. Court of Appeals for the Ninth Circuit, as well as City of New York v. BP PLC et al., case number 18-2188, in the U.S. Court of Appeals for the Second Circuit.

New York AG's Fraud Suit Against Exxon

A three-year, publicly contentious investigation by New York state into ExxonMobil finally came to a head in October when Attorney General Barbara Underwood launched a suit in state court accusing the oil giant of defrauding investors by concealing climate change-related risks to its business.

The suit claims Exxon provided false and misleading statements to investors that policies enacted to combat climate change didn't pose a significant risk of its oil and gas assets being stranded in the future or subject to write-downs, and using nonpublic financial assessments much lower than assessments it publicly claimed to be using. It also alleges that Exxon's deception was sanctioned at the very top reaches of the company, namely by former Chairman and CEO Rex Tillerson, who later spent about a year in the Trump administration as secretary of state.

Exxon has vowed to fight the suit. Attorneys say the case bears watching not only because of the high-profile nature of the litigants, but because it may provide more clarity on what companies' obligations under securities laws are when it comes to making climate-related disclosures to investors.

“There isn't concrete SEC guidance on how you're supposed to be making disclosures around climate change,” Rotman said. “You will see this evolve as more suits are being brought in the courts. Right now, people are reacting to the courts, not the regulators, and that creates uncertainty."

The case is People of the State of New York v. ExxonMobil Corp., case number 452044/2018, in the Supreme Court of the State of New York, County of New York.

Kids' Constitutional Climate Suit Against Feds

The third piece of the trifecta of major climate litigation is the suit brought by 21 children accusing the federal government of pushing policies that will worsen climate change-related dangers. The case was poised for a landmark trial in an Oregon federal courtroom, but is currently on hold while the Ninth Circuit considers the government's latest bid to end the suit.

The children’s suit claims the government violated their constitutional rights by endangering them and future generations with policies that contribute to climate change. The government has repeatedly sought to have the case dismissed, arguing that it unconstitutionally encroaches on legislative and executive power by essentially asking a district court to review and adjudicate the constitutionality of U.S. climate change, energy and environmental policy.

The government's bids to end the suit have reached the U.S. Supreme Court, which briefly paused the case before lifting a stay. However, the high court suggested that the case may be at an advanced-enough stage where the Ninth Circuit can decide if it's legally sustainable.

Dykema member Tom Alleman said there's a common thread linking the youth case with the climate torts and New York's fraud suit against Exxon: a conscious movement to hold energy producers and transporters, and the policies that back them, accountable for adverse climate impacts. While the future of the youth case is uncertain, Alleman said energy companies and government agencies may not be able to duck climate-related claims in court forever.

“Someone is going to hit on a lawsuit where it involves conscious requirements of taking account of climate change with these business decisions,” Alleman said. “Someone is going to find a way to get one of these suits to a jury.”

The case is Juliana et al. v. U.S. et al., case number 6:15-cv-01517, in the U.S. District Court for the District of Oregon.

Lawsuits Over Climate Change's Role in Environmental Reviews

This year, federal appeals courts are poised to weigh in further on how federal agencies must account for climate change impacts in their environmental reviews in order to comply with their National Environmental Policy Act obligations, especially when it comes to energy development on public lands.

For example, the Trump administration and coal producers want the Ninth Circuit to review a Montana federal judge's March conclusion that the U.S. Bureau of Land Management failed to properly analyze the climate impacts of resource management plans covering millions of acres of public lands and federal mineral estates in the coal-rich Powder River Basin.

Meanwhile, environmental and tribal groups have urged the Tenth Circuit to undo a lower court's rejection of challenges to hundreds of new drilling permits issued by the BLM in New Mexico's Mancos Shale.

The Tenth Circuit said in 2017 that the BLM botched an analysis of greenhouse gas emissions in approving lease extensions for four Wyoming coal mines by failing to justify its conclusions that extending the leases would not have an effect on the country’s overall coal consumption. And several appeals and district courts have dinged the BLM and other federal agencies for inadequate climate reviews.

Still, Baker Hostetler energy partner Mark Barron said it isn't clear just what climate impacts the BLM should consider in order for its reviews to survive NEPA scrutiny.

“I'm really interested in how the appellate courts come out on this,” said Barron, who frequently represents oil and gas companies in disputes over energy development on public lands.

Cases include Western Organization of Resource Councils et al. v. BLM et al., case number 18-35836, in the U.S. Court of Appeals for the Ninth Circuit, and Diné Citizens Against Ruining Our Environment et al. v. Zinke et al., case number 18-2089, in the U.S. Court of Appeals for the Tenth Circuit.

Challenges to the Trump Administration's Energy Rule Rollbacks

Efforts by the Trump administration to roll back or rescind Obama-era energy and environmental regulations have been persistently challenged in court since President Donald Trump took office in 2017, and attorneys say there are several battles worth watching in 2019.

Energy development on public lands figures prominently as California and environmental groups are challenging the BLM's repeal of a rule regulating hydraulic fracturing on public and tribal lands. A federal judge previously said the agency didn't have the authority to craft the rule in the first place, but the Tenth Circuit wiped out that ruling and cited the Trump administration's intent to repeal it.

Meanwhile, California and New Mexico, along with environmental and tribal groups, have challenged the BLM's revision of a 2016 rule limiting venting and flaring of methane from gas wells on public and tribal lands that essentially eliminates its key requirements.

“We've been dancing around the procedural background of these cases, now we're going to see merits decisions on the clawbacks in 2019,” said Barron, who represents oil and gas industry groups in the fracking rule cases. “It'll be interesting to see if the rescissions are upheld, but if they're reversed, procedurally what the Trump administration is going to do is going to be really fascinating.”

The Trump administration is also facing legal challenges from several states, environmental groups and electric vehicle advocates over its decision to revisit Obama-era greenhouse gas emissions standards for vehicles.

The cases include State of California et al. v. EPA et al., case number 18-1114, in the U.S. Court of Appeals for the District of Columbia Circuit, and State of California et al. v. Bureau of Land Management et al., case number 4:18-cv-00521, and State of California et al. v. Ryan Zinke et al., case number 3:18-cv-05712, both in the U.S. District Court for the Northern District of California.