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Energy Efficiency Standards A Quiet Success

Posted in Energy Efficiency

Electricity consumption in the United States has generally declined in recent years, due in part to the quiet success of several energy efficiency standards.  In 2013, for instance, the average amount of electricity used in American homes fell to 2001 levels, despite consumers using more products that require electricity.

Building on this success, the U.S. Department of Energy (DOE) announced at various times throughout 2014 several new energy efficiency standards for consumer and commercial products.  Most recently, DOE issued pre-publication final rules setting new efficiency standards for both general service fluorescent lamps (GSFLs) and automatic commercial ice makers (ACIMs).  GSFLS, fluorescent tubes that feature pins at one or both ends for installation, are generally used to light homes, offices, and industrial sites.  DOE estimates that the new standards will reduce CO2 emissions by 90 million metric tons and save more than $15 billion in electricity bills through 2030.  DOE estimates that its updated energy standards for ACIMs–which now include machines that produce “flake” or “nugget” ice–will reduce CO2 emissions by 4 million metric tons and save nearly $600 million in electricity costs through 2030.

These two rules, which go into effect in 2018, are DOE’s ninth and tenth energy efficiency standards finalized in 2014.  Their announcement marks DOE achieving its goal of finalizing ten energy efficiency standards in 2014 as part of the White House’s Climate Action Plan.  The DOE estimates that the ten standards–which apply to dishwashers, water heaters, and other products–will collectively reduce CO2 emissions by over 435 million metric tons and save $78 billion in electricity bills through 2030.

Additionally, 2014 saw the final phase-out stage of certain types of light bulbs.  Originally a bipartisan success story, one aspect of the Energy Independence and Security Act of 2007 established increased minimum energy efficiency standards for various types of light bulbs that were to be phased in from 2012 through 2014.  The DOE was poised to begin enforcing the new rules, which effectively ban certain types of incandescent light bulbs, but recent appropriations bills have effectively blocked DOE from enforcing the rules.  Light bulb manufacturers, however, have already begun complying with the standards.

Older efficiency standards have also been quietly succeeding.  For instance, a new refrigerator meeting the current federal energy efficiency standards would use roughly a quarter of the energy of a refrigerator from 1973, despite offering more storage space and costing significantly less.

RefridgeratorUse

Source: Appliance Standards Awareness Project

FERC Conferences to Address Impact of EPA’s Clean Power Plan on Electricity Reliability and Markets

Posted in FERC

Further highlighting the breadth of potential impacts of EPA’s proposed Clean Power Plan on our nation’s system of electricity generation and the difficult issues posed by the relation of EPA’s proposal to state and regional energy regulatory authorities, FERC has planned a focused dialogue around these issues.

Some members of Congress and others have raised concerns with the EPA’s proposed rule, which would set carbon emission limits for existing electricity generating units, regarding its potential  impact on the reliability of the grid.  Utility decisions to close coal-fired generators in response to the proposal, and potential insufficient pipeline infrastructure in some regions to deliver natural gas to new gas-fired generators, have caused some to say the rule may result in electricity shortages.[1]

In response to these concerns, FERC will hold a series of technical conferences to discuss the implications of state, regional and/or federal plans for compliance with EPA’s proposed rule, especially the impact on electric reliability, wholesale electric markets and operations, and energy infrastructure.  The conferences will also address how the proposed rule may drive the need for additional infrastructure, especially new electric transmission and natural gas pipeline facilities, and whether there are regulatory barriers that need to be addressed.

The first conference, to be held on February 19, 2015, at FERC headquarters, will be Commissioner-led and address a national overview of issues.  According to the recently-released agenda, this conference will address:

  • Electric reliability considerations, including how state, regional, and federal compliance plans could affect grid operations, and how reliability planning and compliance planning can be coordinated to address potential issues.
  • Identifying and addressing infrastructure needs, including coordinating reliability and infrastructure planning and siting with environmental compliance efforts.
  • Potential implications for FERC-jurisdictional markets and opportunities to coordinate compliance approaches with those markets to meet the proposed rule’s requirements.

FERC will also hold three staff-led regional conferences to address the proposed rule’s potential impacts in each region on reliability, operations, generator dispatch and infrastructure.  The regional conferences are as follows:

  • February 25, 2015: Denver (Western region)
  • March 11, 2015: Washington, DC (Eastern region)
  • March 31, 2015: St. Louis (Central region)

FERC does not have a definitive role in EPA’s Clean Power Plan proposal and FERC holding technical conferences with respect to another agency’s rulemaking process is highly unusual.  Accordingly, what, if any, action FERC may take after the conferences is unclear.


[1] In an additional action to assist potential commenters address these important issues, EPA released a Notice of Data Availability that discussed the technical issues for meeting the proposed emission reductions and approaches stakeholder have proposed for addressing those issues.

CFTC Reopens Comment Period for Position Limits

Posted in CFTC

In a notice published in the Federal Register earlier this week, the Commodity Futures Trading Commission (“CFTC”) again reopened the period to comment on its proposed position limits and aggregation rules, in light of questions posed at an Agricultural Advisory Committee meeting in December.  The CFTC’s proposed rules, which we summarized here when they were first issued, would set position limits for 28 physical commodity contracts and economically equivalent swaps, including four energy contracts:  (1) NYMEX Henry Hub Natural Gas (NG); (2) NYMEX Light Sweet Crude Oil (CL); (3) NYMEX RBOB Gasoline (RB); and (4) NYMEX NY Harbor ULSD (HO).  The reopened comment period will close on January 22, 2015.

California Finalizes New Fracking Regulations

Posted in Oil & Natural Gas

On December 30, 2014, the California Office of Administrative Law approved permanent regulations issued by that state’s Department of Conservation, Division of Oil, Gas and Geothermal Resources (“Division”) governing fracking.  The regulations follow the Division’s final interim regulations (effective January 1, 2014), which we discussed here, and further implement California’s fracking statute (SB 4), which we summarized here.

The regulations are supported by a statement of reasons.  According to that statement, the new regulations are intended to supplement the Division’s current oil and gas regulatory framework with regulations specific to well stimulation (“a treatment of a well designed to enhance oil and gas production or recovery by increasing the permeability of the formation”) to meet the mandates of SB 4.  The regulations set requirements to ensure integrity of wells, well casings, and the geologic and hydrologic isolation of the oil and gas formation during and following well stimulation treatments.  They also require full disclosure of the composition and disposition of well stimulation fluids, including hydraulic fracturing fluids, acid well stimulation fluids, and flowback fluids.

Among other things, the regulations implement new requirements for well stimulation permits, neighbor notification, and water well testing.  For example, applications for well stimulation treatment permits will require a water management plan that includes an estimate of the amount of water to be used in the treatment, the anticipated source of the water to be used in the treatment, and the disposal method for the recovered water in the flowback fluid from the treatment.

The new regulations go into effect on July 1, 2015.

CEQ Releases Draft Guidance on Evaluation of Greenhouse Gas Emissions

Posted in CEQ

The White House’s Council on Environmental Quality (CEQ) recently issued updated draft guidance on how federal agencies should consider greenhouse gas (GHG) emissions and the attendant impacts on climate change when conducting environmental analysis under the National Environmental Policy Act (NEPA).  CEQ simultaneously released related, final guidance on conducting programmatic NEPA reviews.  While these actions are designed to improve the consistency and predictability of permitting approaches and thereby facilitate NEPA reviews, they do increase the focus on GHGs for federal permitting considerations and may make it easier for environmental and community groups to challenge project approvals on these grounds.  They may also provoke a careful look from Congress on the basis for CEQ’s focus on GHGs.

The proposed guidance, an update of CEQ’s earlier February 2010 draft guidance, includes significant provisions that will likely increase the scope and complexity of many NEPA analyses.  CEQ seeks to clarify how agencies should assess and describe the effects of greenhouse gases as well as the impact of climate change on proposed federal actions.  Some of the key provisions are as follows:

  • The draft guidance would more clearly require federal agencies to evaluate GHG impacts by federal actions, including federal project approvals or federal funding decisions.  The draft treats GHGs in a similar manner to other pollutants caused by federal activities.
  • Unlike the 2010 version, the current draft guidance does not exclude federal land and resource management actions.  As a result, the guidance would apply to many actions previously thought to be excluded, including natural resource activities on federal and tribal land.
  • Agencies are encouraged to provide quantitative estimates of GHG emissions and sequestration, and are discouraged from using simple recitations that the emissions from a particular action would represent only a small fraction of global emissions.  However, in following the rule of reason and concept of proportionality, quantitative analysis of emissions is generally not required if expected annual emissions are below 25,000 tons of CO2e, or some other threshold that an agency selects and justifies.
  • Consideration should be given to mitigation measures and alternatives to reduce the level of potential GHG emissions.  Some mitigation methods may include enhanced energy efficiency, carbon sequestration, and using renewable energy.
  • Agencies are also asked to consider the effect of a changing environment on proposed projects.  For example, an infrastructure project on a coast will want to account for the environmental consequences of rebuilding if raised sea levels or storms reduce the projected life of the infrastructure.

Some provisions may be prove particularly difficult to comply with and will likely be a significant source of continuing challenge and litigation.  For example, the draft guidance calls on agencies to include in NEPA analyses “emissions from activities that have a reasonably close causal relationship to the Federal action,” which can include both upstream emissions (those that may occur as a predicate for agency action) and downstream emissions (those that may occur as a consequence of the agency action).  Project applicants will want to consider carefully the scope of their analysis in order to minimize the potential for adverse litigation outcomes by satisfying the draft guidance’s approach.

The release of the final programmatic guidance, which became effective December 23, 2014, guides agency decisionmakers and the public in complying with NEPA and indicates that CEQ is striving to make NEPA as workable as possible.  To that end, the final guidance encourages agencies to use programmatic and tiered NEPA reviews wherever appropriate.

The draft guidance will be available for 60 days of public comment.

Sage-Grouse Rider Frustrates Conservation Efforts

Posted in DOI

The debate over federal protections for the Sage-Grouse species we discussed in “FWS Announces ESA Protection for the Gunnison Sage-Grouse” continued this month with the passage of the FY15 appropriations bill, which includes a rider prohibiting the United States Fish and Wildlife Service (FWS) from using the Department of the Interior’s funding to issue new rules concerning the birds.  Introduced by Rep. Mark Amodei (R-Nev.), the rider provides that “[n]one of the funds made available by this or any other Act may be used by the Secretary of the Interior to write or issue [pursuant to the Endangered Species Act (ESA)]—(1) a proposed rule for greater sage-grouse (Centrocercus urophasianus); (2) a proposed rule for the Columbia basin distinct population segment of greater sage-grouse; (3) a final rule for the bi-state distinct population segment of greater sage-grouse; or (4) a final rule for Gunnison sage-grouse (Centrocercus minimus).”[1]

The rider, which was championed by grazing, mining, and oil and gas interests, effectively bars FWS from proposing ESA protections for the Greater Sage-Grouse, a bird whose habitat spans several western states with developing conventional and nonconventional energy sectors.[2]  The Gunnison Sage-Grouse, a related species, was listed as threatened on November 12, 2014, and although the rider does not alter that determination, it does prevent FWS from amending the listing in response to new developments.  Because the birds’ habitat ranges across several western states that are considered to be prime locations for oil, gas, and coal extraction, as well as wind, solar, and transmission line projects, FWS’s inability to list the Greater Sage-Grouse under ESA or to issue new rules concerning the Gunnison variant is a welcome development for many in the energy sector.

The rider will, however, also have the unintended effect of preventing FWS from issuing a 4(d) rule intended to relax protections for the Gunnison Sage-Grouse in Gunnison County, Colorado, where it had planned to ease restrictions due to local progress in conserving the species.[3]  According to FWS, the rider “prevents the Service from finalizing a rule that would provide certainty to landowners, giving them assurance that they can continue economic activities compatible with the conservation of the species, such as properly managed livestock and ranching activities.”[4]  Secretary of the Interior Sally Jewell likewise expressed disappointment in the rider, noting that some Congressmen are “more interested in political posturing than finding solutions to conserve the sagebrush landscape . . . [r]ather than helping the communities they profess to benefit, these members will only create uncertainty, encourage conflict and undermine the unprecedented progress that is happening throughout the West.”[5]

But even as the likelihood of ESA protection for the Greater Sage-Grouse wanes, the Bureau of Land Management (BLM) is revising approximately 100 land-use plans covering millions of acres in states where the bird is indigenous.  ESA-related funding restrictions notwithstanding, BLM’s land-use plans could bolster Greater Sage-Grouse populations by limiting oil and gas development and requiring developers to establish buffer zones around the bird’s breeding grounds.  BLM’s proposed land-use plans in Utah, for example, include a 4-mile buffer around new oil and gas projects, while draft plans in Oregon would discourage development throughout approximately 5 million acres of “focal” Sage-Grouse habitat.[6]

The contentious Sage-Grouse rider is one of several controversial environmental provisions in the spending bill, and is among the first of many appropriation riders that can be expected as the Republican Congress works with the Obama administration in the coming years.


[1] Consolidated and Further Continuing Appropriations Act, 2015, H.R. 83, 113th Cong. § 122 (2014), available at http://www.gpo.gov/fdsys/pkg/BILLS-113hr83enr/pdf/BILLS-113hr83enr.pdf.

[2] See Alex Guillén & Elana Schor, Bye-bye, birdie, Dec. 10, 2014, available at http://www.politico.com/story/2014/12/sage-grouse-spending-bill-endangered-species-protection-113483.html; Phil Taylor, Sage grouse rider — what it all means, Dec. 12, 2014, available at http://www.eenews.net/greenwire/stories/1060010499.

[3] Mark K. Matthews, A federal budget bill has added more confusion to sage grouse fight, Dec. 22, 2014, available at http://www.denverpost.com/news/ci_27184703/federal-budget-bill-has-added-more-confusion-sage.

[4] FWS, Statement by Interior Secretary Sally Jewell on the Sage-Grouse Rider in the FY15 Omnibus Bill, Dec. 17, 2014, available at http://www.fws.gov/news/ShowNews.cfm?ID=59D5150F-A05D-A1AD-9E69AE3066E2183E.

[5] Id.

[6] Taylor, supra note 2.

Risk and Reward in the UK Continental Shelf: An Update Looking Into 2015

Posted in Oil & Natural Gas

In November 2014, we published a three-part series outlining the UK Continental Shelf (UKCS) investment outlook and plans for much-needed reforms in the UKCS oil and gas industry. The update below provides an overview of key developments from December 2014 and considers what may lie ahead for the industry in 2015.

In December 2014, the price of Brent crude oil fell below $60 per barrel for the first time since 2009. As one of the most mature basins in the world, the impact of falling oil prices is felt profoundly by the UKCS oil and gas industry. Throughout December 2014, a series of studies and statements originating from a range of sources collectively produced a picture of the mounting pressures faced by the industry.

In an 18 December 2014 press release, Oil & Gas UK recognised that “the UK oil and gas industry is facing a serious challenge. The falling oil price is affecting activity across the UKCS and companies are having to take hard decisions in light of this challenging business environment.”

Robin Allen, chairman of the independent explorers’ association BRINDEX, expressed concerns that “almost no new projects in the North Sea are profitable with oil below $60 per barrel” and warned that the North Sea oil and gas industry is “close to collapse”.  Sir Ian Wood, who led a recent a review of UK offshore oil and gas recovery, reportedly considered that BRINDEX’s comments were “over the top for an industry which thinks and plans long term”. Nevertheless, Sir Wood conceded that the UKCS faces a “very difficult year to 18 months”.

Highlighting concerns over profitability in the UKCS, financial risk management group Company Watch published research on 29 December 2014 that out of the 126 oil exploration and production companies that are publicly quoted on the London Stock Exchange, 70% are currently loss-making and around a third are not producing any revenues.

Companies facing this level of financial uncertainty at the end of 2014 will likely be looking to become leaner in 2015 to secure their survival, at least until oil prices recover. As to how long this may take, Sir Wood has commented that there are “structural reasons” to believe that the price of oil should recover in 2015 or early 2016.  The credit rating agency Standard & Poor’s most recent price assumptions for Brent crude are $70 a barrel in 2015 and $75 a barrel in 2016. An increase in the price of Brent even to these estimated levels would represent a welcome (although relatively modest) recovery from the circa $60 per barrel level experienced in December 2014.

However, these estimates also indicate that the industry will face considerable challenges for the foreseeable future. What developments are likely in 2015 as companies adapt to the harsh current climate?

We have already seen companies active in the UKCS announcing job losses and pay freezes for contractors. This trend is likely to continue into 2015 as companies seek to lower their cost base and drive efficiency. An estimated 15,000 jobs could be lost in the next year to 18 months (out of a workforce of approximately 375,000). Looking further ahead, a December 2014 industry study by Ernst & Young predicts that the UKCS upstream workforce could be reduced by 35,000 jobs by 2019.

PwC expects 2015 to bring an increase in mergers and acquisitions in the UKCS oil and gas industry, including the possibility of the first hostile takeover in the sector as it faces “uncertain times”. High-profile deals have occurred worldwide in late 2014, with Repsol’s acquisition of Talisman Energy and Halliburton’s acquisition of Baker Hughes.

Oil & Gas UK has called for reforms to be accelerated in light of the falling oil prices, including: (1) urgent action to deliver fiscal change; and (2) swift implementation of the Wood Review recommendations (discussed in parts two and three of our UKCS risk and reward series).

HM Treasury’s Autumn Statement, December 2014 outlined the UK Government’s plans for “major reforms to the oil and gas fiscal regime”, intended to send “a strong signal that the UKCS is ‘open for business’”. However, these reforms have been described as modest, and the UK Government will likely face pressure to take further steps to facilitate recovery and incentivise investment in the UKCS in 2015.

With the industry facing another tough year ahead, the impact of the UK Government’s reforms and continuing developments in the price of oil will be closely monitored by UKCS stakeholders.

NGOs May Sue European Governments for Failure to Comply with EU Mandatory Environmental Standards

Posted in Europe

In November, the Court of Justice of the European Union (“CoJ”) held once again that NGOs and persons directly concerned may bring legal actions before national courts against EU Member States that fail to comply with EU mandatory environmental standards.  The CoJ’s decision (CJEU, C-404/13) concerned the UK government’s failure to adopt adequate plans to ensure compliance with ambient air limits for nitrogen dioxide (“NO2”) in sixteen zones, including London.  The CoJ instructed the UK Supreme Court to adopt “any necessary measure” on the UK government to establish plans that demonstrate how it will comply with the limits for NO2 within a period that should be as short as possible.

The CoJ’s decision establishes an important precedent for a possible wave of legal challenges to force national authorities to limit NO2 and benzene pollution in large cities across Europe.  It is also an important precedent for national litigation in those Member States that fail to comply with EU environmental legislation that requires them to achieve a certain result, even if the Commission has not taken legal action against such national non-compliance.

Thus, the case confirms that environmental NGOs have a powerful litigation route of action as an alternative to the current political context in Brussels where environmental policy does not seem to be among the priorities of the new European Commission.

Background

Directive 2008/50/EC on Ambient Air Quality and Cleaner Air for Europe (“the Directive”) establishes limits on specified air pollutants.  It requires Member States to divide their territory into agglomerations and zones in order to manage air quality in their territory.  Article 13 of the Directive then provides that Member States “shall ensure” that the levels of sulphur dioxide, PM10, lead and carbon monoxide in ambient air do not exceed specified limits in those agglomerations and zones.  Article 13 also states that in those agglomerations and zones the specified limit values of NO2 and benzene “may not be exceeded.”

The Directive, however, provides exemptions for Member States.  Article 23 states that where the levels of pollutants in ambient air exceed the limits in a zone or agglomeration, Member States must adopt air quality plans in order to achieve the required limits.  More specifically, Article 22 states that if the limit values for NO2 or benzene cannot be achieved, Member States may postpone the applicable deadlines for a maximum period of five years provided that they adopt an air quality plan in accordance with Article 23 that also includes specific information demonstrating how the limits will be achieved before the new deadline.  Article 22 also provides that Member States must notify their plan to the Commission, who may require adjustments or the adoption of a new plan.

The case concerned 16 zones of the United Kingdom that did not comply with the limits for NO2 by the established deadline of 2010 and for which the UK government adopted a plan in accordance with Article 23, but did not notify to the Commission a plan showing how it would achieve the limits by 2015 (i.e., five years after 2010) in accordance with Article 22.  The NGO ClientEarth requested the UK government to show how it intended to ensure compliance with the limits of NO2 in the 16 zones by 2015 in accordance with Article 22.  It should be noted that the Commission had not commented on the fact that the UK had failed to notify any plan in accordance with Article 22 for those 16 zones.

The CoJ’s Decision

  • Hard Limits for NO2 and Benzene:  The CoJ started its reasoning by making clear that the limits for NO2 and benzene are mandatory values for which Member States have no discretion.  The Court distinguished the wording “may not be exceeded” for NO2 and benzene from that of  “shall ensure” for the other air pollutants of Article 13 of the Directive.  The CoJ held that the wording “may not be exceeded” amounts to an obligation on Member States “to achieve a certain result.”
  • Violation Despite Existence of Quality Plans:  Thereafter, the CoJ held that, where a zone or agglomeration does not meet the mandatory limit values for NO2 or benzene, the Member State concerned must submit an application for an extension of the deadlines that includes a plan demonstrating how it will achieve conformity with the limit values before the new deadlines.  The CoJ also clarified that the “notification” procedure provided in Article 22 should be interpreted as an application procedure to the Commission.  Moreover, the CoJ distinguished the plans of Article 22 from those regulated in Article 23 of the Directive.  It held that, where a Member State cannot comply with the limit values for NO2 or benzene, in contrast with other regulated air pollutants, it is not sufficient to adopt a plan in accordance with Article 23.  Instead, Article 22 requires that the plan demonstrate how the limits values will be achieved and be submitted to the Commission.
  • Remedies:  Most importantly, contrary to the doubts expressed by the UK courts, the CoJ held that natural or legal persons directly concerned by the limit values for NO2 must be in a position to require the competent authorities, if necessary by bringing a legal action, to establish an air quality plan that demonstrates how the limit values for NO2 will be achieved.  The CoJ recalled its long standing case-law by which “individuals are entitled, as against public bodies, to rely on the provisions of a directive which are unconditional and sufficiently precise.”  According to the CoJ, national courts should interpret their national laws in a way that are compatible with EU environmental directives, and when such interpretation is not possible, they must disregard national rules that are incompatible with the directives.  This supremacy of EU law also means that individuals should be able to take legal action in national courts, which must take “any necessary measure” to ensure compliance with the EU environmental law.  In effect, individuals may take legal action even if the Commission did not react to the Member State’s non-compliance.

Impact

In the current political context where environmental policy may no longer be among the top priorities in Brussels, the CoJ’s decision is an important reminder that environmental NGOs have an alternative means of action to achieve their objectives.  The Court confirms that NGOs and interested parties may sue local authorities in national courts even if, due to political or other reasons, the Commission fails to take legal action against Member States that do not comply with EU environmental law.  The decision seems to follow pattern of recent cases in which the EU Courts are reminding us of the potential implications of EU environmental law, and could start a potentially significant wave of environmental litigation across Europe.  Ironically, businesses in Europe could face an increase of the effective costs of environmental compliance during the next years.

Planning Ahead to Arbitration – Important Considerations for Investors

Posted in Africa

As foreign investment into Sub-Saharan Africa continues to grow, inevitably, so does the risk of disputes arising between commercial parties. The potential benefits of arbitration in settling a commercial dispute, including procedural flexibility and neutrality, are well known (read more from the ICC here). This post provides an introduction to the relevance of arbitration to investors considering entering into commercial contracts in Sub-Saharan African states and/or with Sub-Saharan African counterparties.

International parties and legal practitioners have historically demonstrated a reluctance to commence proceedings before African institutions, or to seat arbitral proceedings in Sub-Saharan jurisdictions. However, statistics published by the ICC Court of Arbitration earlier this year, demonstrate an increase in the commencement of arbitrations in Sub-Saharan Africa in 2013, involving parties of 29 nationalities, arbitrators of 11 nationalities and proceedings seated in 8 different countries in the region. This said, untested national legislation and unfamiliarity with the approach of some national courts to arbitral proceedings and the relative inexperience of some institutions and judiciaries with complex international commercial arbitration, still necessitate a degree of caution approaching arbitrations with an African nexus.

An introduction to strategies for overcoming potential challenges surrounding arbitration

1. Pre-investment stage: drafting a suitable arbitration agreement

Ensuring clear, well drafted arbitration agreements at the investment stage of African-orientated transactions and investments should encourage effective and efficient arbitration proceedings should dispute resolution prove necessary at a later stage.

There is no “one model” for an arbitration agreement, although many international arbitration institutions do provide model clauses that can be utilised. The content of an arbitration agreement will generally require an analysis based on each particular investment or transaction, as well as the requirements of the parties concerning their desired dispute resolution mechanism. When drafting arbitration agreements, investors must carefully consider various factors which could later play into the success of any arbitral proceedings, including whether to opt for an institutional or ad hoc arbitration and the seat and venue for the arbitration.

Arbitral Tribunal

An arbitral institution may be either institutional (formed under the auspices of an arbitration centre) or ad hoc (formed independently from any institution by agreement between the parties). If institutional arbitration is preferred, parties have a plethora of institutions to choose from. Many parties still opt for long standing institutions, such as the ICC. Several regional institutions have been established in recent decades such as Sub Saharan African arbitration centres, including the Arbitration Foundation of Southern Africa (AFSA), the London Court of International Arbitration and Mauritius International Arbitration Centre (LCIA-MIAC), and the Common Court of Justice and Arbitration (CCJA).

The establishment of the LCIA-MIAC Arbitration Centre in 2011, has drawn particular interest. The centre is set up under a similar model to the highly successful DIFC LCIA Arbitration Centre in Dubai and is well-positioned in Mauritius, at the heart of Africa’s offshore financial businesses. The LCIA-MIAC framework is innovative, not least because the Permanent Court of Arbitration (in The Hague), rather than the national courts, is the default appointing authority behind the institution and the PCA has a permanent representative at the LCIA-MIAC. It is early days, but the LCIA-MIAC is anticipated to become a preferred arbitration centre for Africa-related disputes.

Seat of the Arbitration

The law of the seat may be different to the law governing the substance of the dispute and is a key component of the arbitration agreement as it often governs both internal procedural matters relating to the arbitration and the interaction national courts will have in the arbitration proceedings. Where transactions and investments are Africa-related , parties may opt to seat the arbitration within the African state at the centre of the dispute or outside the relevant African jurisdiction.

When selecting the arbitral seat, one must consider a state’s national laws. While some states’ national arbitration laws are based on or incorporate the UNCITRAL “Model Law”, other states have adopted their own arbitration statutes, some of which are virtually silent on the general powers of the arbitral tribunal. Investors should be careful not to seat an arbitration in a state whose arbitration laws are unsettled or vague.

Venue for Proceedings

It is open to the parties to agree on a venue for holding meetings and hearings during any ongoing arbitral proceedings that is mutually convenient for the parties, the arbitrators and legal representatives. As the venue can be an alternative location to the seat of the arbitration, this can potentially provide time and cost savings for those involved in the proceedings, while allowing the parties to agree on a seat of arbitration that provides the most attractive procedural advantages for the parties.

2. Enforcement Stage

In the event that an arbitral award is not voluntarily complied with, a party may need to seek to enforce an award before national courts in the region. Enforcement success in Sub-Saharan Africa, as in other regions, hinges on the approach of the particular national courts.

To enforce an arbitral award in a state that has ratified the New York Convention on the Recognition and Enforcement of Arbitral Awards (the New York Convention) should, in theory, be relatively straightforward. The New York Convention is a pro-enforcement mechanism under which contracting states are required to recognise and enforce foreign arbitral awards, except in limited circumstances. In recent years, a number of new Sub-Saharan African states have acceded to the New York Convention. Burundi, for example, became the 34th African state to become signatory to the New York Convention earlier this year.  However, even in contracting states, approaches taken by national courts to the interpretation of provisions of the New York Convention vary.

There are other regional arrangements in place regarding enforcement of awards. For example, the regional Organisation pour l’Harmonisation en Afrique du Droit des Affairs (OHADA) Treaty, entered into by 17 West and Central African states, provide an enforcement mechanism among its signatory states. Under the OHADA Treaty, signatory states are generally required to enforce foreign arbitral awards rendered in other signatory states.

While national courts have, at times demonstrated a pro-arbitration approach to the enforcement of awards, the case law is inconsistent and a complex array of factors play into whether enforcement is effective.  Covington has released a separate guide on the enforcement of arbitral awards in Sub-Saharan Africa (read here).

Author Jeremy Wilson is a partner in Covington’s arbitration team and contact for the London office. Co-author Catherine Karia is an associate in Covington’s arbitration team and Co-author Hannah Edmonds is a trainee.

FWS Announces ESA Protection for the Gunnison Sage-Grouse

Posted in DOI

On November 12, 2014, the United States Fish and Wildlife Service (FWS) announced that the Gunnison Sage-Grouse would be listed as a threatened species under the Endangered Species Act (ESA).  Meanwhile, questions remain about how a related species, the Greater Sage-Grouse, will be categorized under ESA when FWS makes a decision on its status in September 2015.  Because the sage-grouses’ habitat spans millions of acres and ranges across several western states that are considered by many to be prime locations for energy development, FWS’s treatment of the birds will undoubtedly have significant effects on oil, gas, and coal extraction, as well as wind, solar, and transmission line projects.

The Gunnison Sage-Grouse is a ground-dwelling bird which depends on contiguous areas of sagebrush for its food, cover, and reproduction habitats.  Its current range is limited to southwestern Colorado and southeastern Utah, where the bird occupies approximately 940,000 acres.  The Greater Sage-Grouse is a close relative—so close, in fact, that the two species were recognized as distinct as recently as 2000—with a range across 165 million acres, primarily in Wyoming, Montana, Nevada, and Idaho.  Both species continue to decline in number as a consequence of habitat loss occasioned by human development.

FWS’s decision to list the Gunnison Sage-Grouse as threatened rather than endangered is viewed as controversial by some, particularly because FWS originally proposed to list the species as endangered in January 2013.  Under ESA, a species deemed to be in danger of extinction throughout all or a significant portion of its range is categorized as endangered, whereas those species that are likely to become endangered within the foreseeable future are listed as threatened.  16 U.S.C. § 1532.  ESA prohibits the “take” of species listed as threatened or endangered under the Act, and defines “take” as “to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or to attempt to engage in any such conduct.”  16 U.S.C. § 1532.  FWS has further clarified that “[s]ignificant habitat modification or degradation have the potential to harm Gunnison sage-grouse and may result in take of the species.”[1]  FWS explained that listing the Gunnison Sage-Grouse as merely threatened gives FWS “the flexibility to tailor the conservation measures needed to protect the species through a special 4(d) rule, which it intends to propose in early 2015 to allow . . . ranchers, farmers and other landowners who commit to Gunnison sage-grouse conservation to continue to manage their lands without additional restrictions.”[2]  According to FWS, the 4(d) rule may “exempt from ESA restrictions a number of ongoing activities, including properly managed livestock and ranching activities; routine agricultural practices on existing row crops, hay fields, and pastures; habitat improvement or protection projects . . . and limited expansion of existing agricultural, residential and commercial facilities.”[3]  Such special regulations for threatened species, which could not be developed if the Gunnison Sage-Grouse were listed as endangered, are intended to “provide important flexibility to address species-human conflicts as the species approaches recovery and becomes more numerous and widespread.”[4]  By listing a species as threatened rather than endangered, FWS also retains greater flexibility to issue permits for takes that would otherwise be prohibited, including takes related to zoological exhibition, educational purposes, and any other special purposes that FWS deems consistent with ESA.

Conservation groups, however, have indicated that they plan to sue FWS over its failure to afford the animal more stringent protections.  On November 20, 2014, the Center for Biological Diversity and Western Watersheds Project gave a notice of intent to sue FWS over its categorization of the Gunnison Sage-Grouse, arguing that FWS violated ESA and the Administrative Procedure Act by, among other things, failing to use the best available science in making its determination and failing to provide public notice or opportunity for comment on its change in position that the species should be listed as threatened.  However, conservation measures will likely involve some restrictions on development, including possible road closures during nesting season, consolidation of drilling on fewer sites, and use of directional drilling to minimize habitat disruption.[5]  The nature and extent of such measures remains to be seen.

Industry and conservationists alike will want to pay close attention to FWS’s protections for the Gunnison Sage-Grouse and to the special 4(d) rule scheduled for 2015, as these may offer some indication about FWS’s categorization of and eventual protective measures for the Greater Sage-Grouse.  Because the Greater Sage-Grouse enjoys a broader habitat than the Gunnison variant, and because much of that habitat is located in western states with developing conventional and nonconventional energy sectors, the animal’s treatment under ESA may ultimately have impacts on the energy industry in the region.  If the Greater Sage-Grouse is listed as endangered, developers whose projects encroach onto the animal’s vast habitat could not hope to receive the benefit of a special 4(d) rule exclusion, and may be subject to additional precautions to avoid a take of the species‑including, for example, seasonal restrictions on drilling and limits on the number of oil and gas wells within key habitat regions.

ESA listing of the Greater Sage-Grouse will likely result in greater protections than those that are currently imposed by the western states where the bird is most prevalent.  A report released on November 21, 2014 by the United States Geological Survey suggested, for example, that a minimum buffer of 3.1 miles around Greater Sage-Grouse breeding sites would be needed to conserve the species.  This recommended distance is appreciably larger than the buffer zones that have been imposed around breeding sites by certain states in an effort to protect the bird:  Montana and Wyoming, for example, adopted management plans that call for buffers of six-tenths of a mile in key Greater Sage-Grouse habitats.[6]  Montana and Wyoming are among eleven western states that worked with FWS to develop sage-grouse management and conservation projects in an effort to avoid ESA listing of the birds.[7]  By some estimates, these states have already invested about $200 million into conversation efforts, funds that are often generated from the sales of upland game bird licenses or stamps.  Ken Mayer, former director of the Nevada Department of Wildlife, warns that an ESA listing of the Greater Sage-Grouse could potentially compromise that funding, as “[i]t would be difficult to justify the use of such hunter dollars for managing an unhunted species.”[8]


[1] FWS, Gunnison Sage-Grouse: Threatened Designation and Responsibilities under the Endangered Species Act, Nov. 2014, available at http://www.fws.gov/mountain-prairie/factsheets/Gunnison%20Sage-grouse%20Threatened%20Designation%20Factsheet.pdf.

[2] FWS, U.S. Fish and Wildlife Service Protects Gunnison Sage-Grouse as Threatened Under Endangered Species Act, Nov. 12, 2014, available at http://www.fws.gov/mountain-prairie/pressrel/2014/11122014_ServiceProtectsGunnisonSageGrouseAsThreatenedUnderESA.php.

[3] Id.

[4] FWS, What is the Difference Between Endangered and Threatened? Mar. 2003, available at http://www.fws.gov/endangered/esa-library/pdf/t-vs-e.pdf.

[5] See Richard T. Stilwell, Gunnison Sage Will Give Energy Something to Grouse About, Law 360, Nov, 25, 2014, available at https://www.law360.com/energy/articles/599061/gunnison-sage-will-give-energy-something-to-grouse-about.

[6] See Matthew Brown, Report: Grouse Needs 3-Mile Buffer From Drilling, Nov. 21, 2014, available at http://www.cbs8.com/story/27449650/report-grouse-needs-3-mile-buffer-from-drilling.

[7] Amy Joi O’Donoghue, Report Highlights 11 States’ Efforts to Protect Sage Grouse, Mar. 24, 2014, available at http://www.deseretnews.com/article/865599354/Report-highlights-11-states-efforts-to-protect-sage-grouse.html.

[8] Angus M. Thuermer, Jr., Could Federal Protection Mire Sage Grouse Conservation? Oct. 28, 2014, available at http://wyofile.com/angus_thuermer/federal-protection-mire-sage-grouse-conservation/.